The announcement came as a bomb exploded in a busy intersection in Cairo Thursday morning, hitting a bus and wounding five people. Though small, the blast raised fears that a campaign of violence by Islamic militants that for months has targeted police and the military could turn to civilians in retaliation for the stepped up crackdown.
The terrorist labeling of the Brotherhood - an unprecedented step even during past decades when the group was banned - takes to a new level the government's moves to crush the group, which rode on elections to dominate Egypt's politics the past three years until the military removed Islamist President Mohammed Morsi in July after massive protests against him.
The Brotherhood vowed to "qualitatively" escalate its protests against the new military-backed interim government, whose authority it rejects. The group has struggled to bring numbers into the streets in past months under a crackdown that has already killed hundreds of its members and put thousands more in prison, including Morsi and other top leaders - and there was little sign of any protests on Thursday.
The moves - all playing out before the backdrop of increasing violence by al-Qaida-inspired militants -raise the potential for greater turmoil as the country nears a key Jan. 14-15 referendum on a revised constitution, a milestone in the post-Morsi political transition. The government is pushing for overwhelming passage of the new document, while the Brotherhood vows to stop it with protests.
Ahmed Imam, spokesman for the Strong Egypt Party founded by ex-Brotherhood member Abdel-Moneim Abolfotoh, warned that the terrorism label "leaves the Muslim Brotherhood and its supporters only one choice, which is violence."
Both sides are showing "a great deal of stupidity," he said, blaming the Brotherhood for failing to firmly distance itself from militant violence and the government for closing doors to reconciliation.
Speaking to military graduates Thursday, military chief Gen. Abdel-Fattah el-Sissi, the man who removed Morsi and is now Egypt's most powerful figure, vowed the country will "stand steadfast in confronting terrorism."
"Don't let any of the incidents happening now affect the will of Egyptians. Never," he said. "Anyone harms you will be wiped from the face of Earth."
In past months, authorities have used penal code's various legal justifications for arresting Morsi supporters, from inciting violence to blocking roads. But Wednesday's terror designation means the Brotherhood's hundreds of thousands of members can be arrested for simple membership under a tough, years-old anti-terrorism law that outlines death penalties or long prison sentences for some crimes. The government says it will leave leeway for those who renounce the group's ideology and membership, but didn't explain how since members don't carry IDs to prove they belong.
The government said it urged other Arab governments to take similar steps under a 1998 regional anti-terrorism treaty, to increase pressure on Brotherhood branches, especially in Gulf countries already known for longtime enmity to the group.
Police on Thursday arrested 16 Brotherhood members in the Nile Delta province of Sharqiya on charges of belonging to a terrorist group, the state news agency MENA said. Another 54 were arrested on accusations they attacked police stations or incited violence.
Private TV networks also aired the number for a hotline for people to report "members of the terrorist Brotherhood" to the National Security Agency - raising the possibility of citizens turning on citizens and increasing the group's isolation.
Interior Ministry spokesman Hani Abdel-Latif said the security forces now had an even freer hand to move against Brotherhood protests. "Things are totally different now," he told state TV. He said police "won't be restricted" by provisions in a recent anti-protest law that proscribed gradual steps against protests, starting with verbal warnings, water cannons and tear gas before turning to heavier methods.
Under the anti-terrorism law, those who participate in Brotherhood protests could face up to five years in prison, and "those leading this group (the Brotherhood) could be punished by the death penalty," he said.
In other steps, the Brotherhood's daily newspaper, Freedom and Justice, was suspended after security forces confiscated Thursday's edition.
To drain the group's resources, the government froze funds of more than 1,000 non-government organizations and charities linked to the Brotherhood and put more than 100 schools run by the group under government supervision. That directly attacks the grassroots network that gave the Brotherhood much of its strength in Egyptian society. The group is involved in a wide array of charities, providing cheap or free food, clothing and medical care to poor Egyptians.
The Brotherhood lashed out at the move, using a sectarian tone. It said the freezing of the funds aims to "fight Islam" and opens the door for "Christian groups to draw poor Muslims away from their religion" by stepping in with charity.
Since Morsi's ouster, suicide bombings, ambushes and drive-by shootings by suspected Islamic militants have escalated. They have mainly targeted security forces and troops in the Sinai Peninsula, but they have also spread to Cairo and other parts of the country. The deadliest bombing yet came on Tuesday, when a suicide car bomber hit a security headquarters in the Nile Delta city of Mansoura, killing 16 people, almost all policemen.
With the terrorism label, the government is accusing the Brotherhood of being behind the militant campaign - as well as pervious violence dating back to the 1940s - though authorities have offered no proof. The group denies the accusations.
The homemade bomb in Thursday's blast in Cairo appeared intended to cause panic rather than casualties, the Interior Ministry's top explosives expert Gen. Alaa Abdel-Zaher told private CBC television.
The bomb, planted in a busy intersection near schools in Cairo's eastern district of Nasr City, went off at 9 a.m. It shattered windows on a passing public bus, and flying glass injured five people, one of them seriously, the Interior Ministry said.
Another remote-control bomb, attached to a nearby billboard, was discovered and defused, apparently intended to hit security forces who responded to the first, state TV reported.
Islamic militant groups have claimed responsibility for the bombings and shootings. The most prominent militant group, Ansar Beit al-Maqdis, announced it carried out Tuesday's suicide bombing in Mansoura to avenge the "shedding of innocent Muslim blood" by the "apostate regime."
So far, there is no solid evidence that al-Qaida inspired group is connected to the Brotherhood. During his year-long presidency, Morsi allied with hardline Islamists and held mediated talks with militants in Sinai to negotiate a truce.
Last week, a new trial of the ousted leader and more than 30 others was announced on charges of conspiring with terrorist groups before, during and after Morsi's presidency.
In a statement late Wednesday, the Brotherhood-led alliance vowed to escalate protests, saying, "Today we are at the doorstep of a turning point in the revolutionary escalation after the coup leaders insisted on terrorism and violence."
