The Israeli government also claimed the broadcaster was “a tool" of Isis, whose followers subscribe to an extreme form of Sunni Islam, and also Iran, the leading Shia Muslim country.
Al Jazeera reported on its website that it had been prevented from attending the news conference at which the announcement was made.
Israel’s communications minister Ayoub Kara said it would block all the Qatar-based station's Arabic and English channels and remove the press credentials of its journalists.
He accused the station of “supporting terrorism” and said cable broadcasters had agreed in principle to his proposal to take it off air, but that closure of the offices would require further legislation.
“Lately, almost all countries in our region determined that Al Jazeera supports terrorism, supports religious radicalisation," Mr Kara said.
"And when we see that all these countries have determined as fact that Al Jazeera is a tool of the Islamic State [Isis], Hamas, Hezbollah and Iran, and we are the only one who have not determined that, then something delusional is happening here."
The network, which has 80 offices around the world, responded on its website, saying: ”Al Jazeera stresses that it will closely watch the developments that may result from the Israeli decision, and will take the necessary legal measures towards it."
It also denied the charges its coverage of recent unrest at the al-Aqsa Mosque in Jerusalem was unprofessional.
”Al Jazeera will continue to cover the events of the occupied Palestinian territories professionally and accurately, according to the standards set by international agencies, such as the UK Office of Communications (Ofcom)," it said.
Israel’s decision follows in the footsteps of Middle Eastern neighbours Jordan and Saudi Arabia, who have closed Al Jazeera’s local offices.
The Al Jazeera channel and website, which are owned by the government of Qatar, have also been blocked in the United Arab Emirates, Saudi Arabia, Egypt and Bahrain. Egypt banned Al Jazeera several years ago.
The network insists it is independent of its owners, although this is disputed by critics. Its willingness to broadcast dissenting views has caused waves throughout the Arab world since its launch in 1999, coming to particular prominence following the 9/11 attacks and during the war in Afghanistan.
Israeli Prime Minister Benjamin Netanjahu said on Facebook last month that he wanted Al Jazeera expelled.
”The Al-Jazeera channel continues to incite violence around the Temple Mount,“ he wrote in reference to the site which is known to Muslims as Haram al Sharif and to Jews as the Temple Mount.
”I have appealed to law enforcement agencies several times to close the Al Jazeera office in Jerusalem... If this is not possible because of legal interpretation, I am going to seek to have the necessary legislation adopted to expel Al Jazeera from Israel.“
The Israeli announcement was condemned by Hamas, the militant group that rules in the Gaza Strip.
”Al Jazeera had a big role conveying the Palestinian narrative with a high professionalism," said spokesman Hazem Qassem.
Aidan White, director of the London-based Ethical Journalism Network, called Israel's decision ”a full frontal attack“ on press freedom.
”It is a shocking statement, and it completely undermines Israel's claims to be the only democracy in the region, because it gets to the heart of one of the most important institutions of democracy," he said.
New York-based group The Committee to Protect Journalists (CPJ) also criticised the move for violating the freedom of the press.
“Censoring Al-Jazeera or closing its offices will not bring stability to the region, but it would put Israel firmly in the camp of some of the region's worst enemies of press freedom,” CPJ’s Middle East and North Africa programme coordinator Sherif Mansour said in a statement.
“Israel should abandon these undemocratic plans and allow Al-Jazeera and all journalists to report freely from the country and areas it occupies.”
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies