The ruling by Moscow's City Court puts Navalny's Anti-Corruption Foundation, the FBK, and its regional political offices alongside terror groups like the Islamic State and means that anyone publicly supporting Navalny could now face lengthy prison sentences, as well as being barred from running in elections.
Navalny, Russian President Vladimir Putin's most prominent critic, was sentenced to two and half years in a prison camp in February after surviving a nerve agent poisoning last summer that independent investigations, like the one led by Bellingcat, have linked to the Kremlin.
The move to outlaw Navalny's movement is part of a sweeping and unprecedented crackdown under Putin to stifle dissent that has intensified in recent months. It is widely seen by rights groups and independent observers as an effort to clear the field of anti-Kremlin opposition ahead of Russia's parliamentary elections in September.
The court accepted a request by Moscow's Prosecutor's Office to designate the Anti-Corruption Foundation and his regional offices, known as "Navalny Headquarters" as "extremist" under legislation nominally intended for violent terrorist groups, but which has also been used against opponents of the Kremlin.
Navalny's Anti-Corruption Foundation produces his spectacular investigations into alleged corruption among Putin and powerful Russians that have helped create his grassroots following in Russia.
It organizes campaigns and peaceful protests that call for free elections, an end to corruption and to free political prisoners.
The ruling means that anyone working for the organizations or financing them could now face up to six years in prison. But even those expressing support for Navalny publicly or organizing demonstrations associated with him could also risk similar sentences.
"It's historic. Russia. A descent into the abyss. This impacts us all," Anti-Corruption Foundation Director Ivan Zhdanov wrote in Russian on Twitter.
After the ruling, Navalny's team posted a message from him in prison calling it a naked attempt to protect Putin's power and defend he and his allies' ability to enrich themselves.
"When corruption is the basis of state power, fighters against corruption are extremists," Navalny wrote in Russian in the statement posted on his official Instagram.
Navalny said despite the ruling the movement would find ways to continue its fight.
"We are not a name or paper or an office. We are a group of people who are united and organize those citizens of Russia who are against corruption, are for honest courts and equality before the law," he wrote. "There are millions of them. You are them. And while you are there, we aren't going anywhere."
The court hearings were held partly behind closed doors because some of the case evidence against the Anti-Corruption Fund was classified as secret.
Prosecutors accused Navalny's organizations of "under the cover of liberal slogans" trying to create the "conditions for destabilizing the social and civil-political situation." They alleged the groups are attempting to change Russia's "constitutional order," including through a supposed foreign-backed revolution.
The hearing Monday lasted 12 hours, and late into the night, as Navalny's team suggested the authorities were trying to rush through the ruling.
The United States also condemned the decision on Wednesday, calling it "particularly disturbing."
"This designation puts staff members, volunteers, and thousands of supporters across Russia at risk of criminal prosecution and imprisonment for exercising fundamental human rights guaranteed by the Russian Constitution, and it further restricts the ability of opposition candidates to appear on the ballot in the September Duma elections," State Department spokesperson Ned Price sad in a statement. "With this action, Russia has effectively criminalized one of the country’s few remaining independent political movements."
This decision to outlaw Navalny's movement is a strong challenge to President Joe Biden, one week before he and Putin are scheduled to hold their summit.
The crackdown on dissent in Russia in the past year has become more intense than at any other time during Putin's two-decade rule, with the Kremlin no longer seeming willing to tolerate any political opposition.
Putin's ruling party, United Russia, is polling badly as the parliamentary elections approach and Navalny's team has planned to target them as an opportunity to embarrass the party by inflicting losses through tactical voting.
Ahead of the vote, authorities have taken steps to bar anti-Kremlin opposition from taking part. This week, Dmitry Gudkov, one of the few prominent opposition figures not under criminal investigation or in exile, fled Russia to Ukraine after police detained and questioned him, saying he feared he and his family could face arrest.
ABC News' Conor Finnegan contributed to this report.