Germany's domestic intelligence service has designated the AfD as a right-wing extremist group, handing authorities greater powers to monitor the party and fuelling calls for it to be banned.
The move came after the far-right, anti-immigration Alternative for Germany (AfD) came second in national elections in February and also racked up a string of local election triumphs, especially in the ex-communist east.
The BfV domestic intelligence agency, which had already designated several local AfD chapters as right-wing extremist, said it decided to give the entire party the label due to its attempts to "undermine the free, democratic" order in Germany.
It cited in particular the "xenophobic, anti-minority, Islamophobic and anti-Muslim statements made by leading party officials".
The classification gives authorities greater powers to monitor the party by lowering the barriers for such steps as intercepting telephone calls and using undercover agents.
The AfD's co-leaders said they would take legal action against the BfV's classification of the party as extremist, describing the decision as a "severe blow to German democracy".
"The AfD is being publicly discredited and criminalised shortly before change of government," Alice Weidel and Tino Chrupalla said in a statement.
The party "will continue to defend itself legally against these defamatory statements that endanger democracy," the statement added.
The new designation also revived calls to ban the party, heightening political tensions in Europe's top economy where conservative Friedrich Merz is set to take power next Tuesday at the helm of a coalition government with the centre-left SPD.
Ralf Stegner, an SPD politician, told news magazine Der Spiegel there should be greater efforts to "combat these enemies of democracy with all political and rule-of-law tools".
Deputy AfD leader Stephan Brandner told the Rheinische Post newspaper that the decision was "complete nonsense".
It was "absolutely nothing to do with law and order, and is purely a political measure," he charged.
Interior Minister Nancy Faeser insisted there had been "no political influence" on the investigations undertaken by the independent BfV.
Announcing its decision, the spy agency said that the AfD "aims to exclude certain population groups from equal participation in society".
In particular, the AfD does not consider German citizens with a migrant background from countries with large Muslim populations to be "equal members of the German people", it added.
"This is evident in the large number of ongoing xenophobic, anti-minority, Islamophobic and anti-Muslim statements made by leading party officials," it said.
'Firewall'
The party, founded in 2013, has seen its fortunes ebb and flow but in recent times surged in popularity by capitalising on growing concern about migration at a time when Europe's biggest economy was mired in recession.
It came second in the general election in February, winning more than 20% of the vote, behind the centre-right CDU of Mr Merz.
More recent opinion polls have even shown the party running neck-and-neck or even slightly ahead of the CDU/CSU alliance.
In a country still haunted by its dark World War II past, establishment parties have vowed not to go into government or work with the AfD.
Mr Merz breached this so-called "firewall" against the AfD during the election campaign by relying on its support to pass a parliamentary motion demanding tougher immigration measures, sparking widespread anger and nationwide protests.
He has since insisted he will not work with the party as he has formed a coalition with the SPD of outgoing Chancellor Olaf Scholz.
The AfD during the election campaign won the enthusiastic backing of Elon Musk, a US tech billionaire and close adviser to US President Donald Trump.
Mr Musk claimed only the AfD could "save Germany", appeared virtually at one of their rallies and hosted an interview with party co-leader Ms Weidel on his social media platform X, formerly Twitter.
The party has faced frequent controversies. Its leading members have been accused of using banned Nazi slogans and of downplaying atrocities committed by the Nazis.
It has also faced allegations of close ties to Russia and earlier this week a former aide to an AfD MEP was charged over suspected spying on behalf of China.
