In an unusual and strongly worded warning, Tom Sackville, the Home Office minister, said he was concerned about the Rally For Islamic Revival due to take place in the London Arena in the city's Docklands.
Amid fears that the event will be used by some to advocate Islamic revolution, he said the Government would "ensure that the law in this country is upheld".
"This rally will be monitored, and anyone who breaks the law, whether by their statements or actions, will face prosecution," he said.
Incitement to racial hatred carries a maximum sentence at crown court of two years in jail and/or an unlimited fine, and in a magistrates' court of six months in jail and/or a pounds 5,000 fine.
Egypt and Algeria are among the countries that have put pressure on the Government to ban the 1996 International Islamic Conference which is expected to draw thousands of Muslims to discuss the way forward to a single Islamic state dominating the world.
The organisers, who claim to have received threats to bomb the 12,000- seat arena and against themselves, advocate revolution to overthrow Middle East governments they consider to be corrupt.
The Home Office confirmed that fears centred on three people who have been excluded from Britain on the grounds that their presence here would "not be conducive to national security".
They were named as Sheikh Mohammed Hussein Fadlallah, spiritual leader of Leb-anon's Hizbollah, Omar Abdul- Rahman, the blind Egyptian cleric imprisoned over America's World Trade Centre bombing, and Osama Bin Laden, a Saudi national who has called for a holy war against American troops in Saudi Arabia.
Mr Sackville said: "The British Government strongly condemns any support for terrorism or calls for violence of any kind.
"The UK is second to none in its determination to fight terrorism wherever it occurs, and whatever its purpose. Ministers have expressed their concern about plans for an Islamic group to hold a so-called Rally for Revival in London on 8 September."
The rally organisers insisted no one would break any laws.
Sheikh Omar Bakri Muhammad said they had decided to withdraw the three most controversial messages from Mohammed Hussein Fadlallah, Osama Bin Laden and Omar Abdul-Rahman so there was "no legal excuse" for anyone to stop the rally going ahead.
The sheikh, who comes from the group Al-Muhajiroun, the "voice, the eyes, the ears of the Muslims", said the messages were being distributed through the Muslim community by other means.
"We have had tremendous pressures from different directions - from the Government, from the Muslim community, even, for the security of the Muslim brothers who are coming to the conference. We decided we didn't want to show these messages."
A Scotland Yard spokesman would say only that the police were aware of the event and, as a matter of routine, had discussed arrangements with the organisers and venue managers.Reuse content