The action came a day after the United Nations listed Jamat-ud-Dawa as a front group for Lashkar-e-Taiba, which was blamed for the strikes. The U.N. also subjected Jamat-ud-Dawa to sanctions as a terrorist group, including an asset freeze, travel ban and arms embargo.
Pakistan has already announced the arrests of 20 militants - including two alleged by India to have masterminded the attacks - and has vowed to cooperate with its neighbor.
India, which says the attacks were carried by Pakistanis as well as plotted and directed by militants in Pakistan, remains skeptical of the response so far.
Elements in Pakistan's powerful military and intelligence agencies are believed to retain links with militants, which they have used as proxy fighters against Indian rule in the disputed Kashmir region, raising questions about their willingness and ability to crack down on them.
Islamabad has targeted Lashkar-e-Taiba and other militants before, detaining leaders - including one picked up Thursday - only to release them later. That has bolstered critics who allege the government is not serious about fighting the extremists.
The attacks in Mumbai, India's financial center, killed 171 people and sharply raised tensions between two nuclear-armed neighbors that have fought three wars in the last 60 years.
Jamat-ud-Dawa has been under scrutiny since India named Lashkar-e-Taiba the prime suspect in the attack. U.S. officials have long maintained the two groups were one and the same.
Jamat-ud-Dawa denies any links to terrorism.
Lahore Police Chief Pervez Rathor said the group's head, Hafiz Mohammed Saeed, and four other leaders had been placed under house arrest for three months. He did not say whether they would be charged with a crime.
"We have taken action in response to orders from the federal government," he said minutes before the information minister announced Jamat-ud-Dawa had been banned.
Central Bank spokesman Syed Wasimuddin said Pakistani banks had been ordered to freeze the group's assets. It is unclear how much money the group has under its control, but its Web site has details of a bank account for donations.
The Interior Ministry said it had ordered all offices of the group closed around the country.
TV news video showed at least one office with its doors locked and sealed. An Associated Press reporter in the southern city of Karachi said offices there were deserted and a witness saw men - apparently plainclothes security agents - removing documents from one site.
By late Thursday, police had not moved to close the group's sprawling headquarters near the city of Lahore in eastern Punjab, according to an AP reporter there.
"The ban on our organization in unjust," said Abu Hassan, an administrator at the campus, which houses farmland, school buildings and a 100-bed hospital. "Our government took the decision in haste just under pressure from India and America. We do not need to be afraid of anything."
Jamat-ud-Dawa promotes a hard-line brand of Islam and is virulently anti-Indian. It also runs hundreds of schools and clinics across Pakistan and has helped the victims of two recent earthquakes.
The moves against Jamat-ud-Dawa coincided with a visit to Pakistan by Deputy U.S. Secretary of State John Negroponte, the second trip by a top-ranking American official in a week.
U.S. officials are concerned that tensions between India and Pakistan are distracting Islamabad from battling al-Qaida and Taliban militants near the Afghan border.
U.S. and Indian officials say Pakistan's military and intelligence helped create Lashkar-e-Taiba two decades ago to fight in Kashmir, the Himalayan region claimed by both South Asian countries and the source of most of their tension.
The U.N. did not release the evidence it based its decision to list Jamat-ud-Dawa as a front for the group on Wednesday. The United States designated the charity a terrorist outfit two years ago.
Washington says it has seen no evidence any Pakistani state agency was involved in planning or carrying out the Mumbai attacks - something that could prompt New Delhi to launch military strikes against Pakistan.
After a 2001 attack on the Indian parliament by alleged Pakistani militants, Islamabad arrested Jamat-ud-Dawa chief Saeed and another leader of pro-Kashmir militant groups. They were released without charge less than a year later.
While Pakistan's new civilian government has taken a strong stance against Islamic extremism and reached out to India, there are doubts that the military, which has ruled for about half the country's 61-year history, will turn decisively against Jamat-ud-Dawa.
"The government will try to crack down, but it is a different issue whether they will be able to do so," said defense analyst Ayesha Saddiqa. "It would be difficult for them when armed forces are not in their control."
Before the ban was announced, Saeed denied that the charity was involved in terrorism and said the group would petition the U.N. as well as national and international courts to overturn the decision.
"If India or the U.S. has any proof against Jamat-ud-Dawa, we are ready to stand in any court. We do not beg, we demand justice," he said.
Pakistan's largest Islamic party, a fervent supporter of the struggle in Kashmir, condemned the U.N. move as an attack on Pakistan's independence and threatened protests.
"The people who are struggling for the freedom of Kashmir would be discouraged," Qazi Hussain Ahmed, the leader of Jamaat-e-Islami, told the AP. "We will be with the people if they decide to come out onto the streets to protest."
The Mumbai attacks provoked a public outcry in India over the government's failure to detect the plot. On Thursday, India said it would create an FBI-style national investigative agency as part of a massive security overhaul.
"Given the nature of the threat, we can't go back to business as usual," Home Minister Palaniappan Chidambaram told Parliament, adding he would "take certain hard decisions to prepare the country and people to face the challenge of terrorism."
It was the government's first detailed response to widespread public anger over security and intelligence failures in the attacks. Chidambaram has previously apologized for government "lapses" in the assault.
The new agency will coordinate with state and local police to analyze tips and intelligence, said Chidambaram, the country's top law enforcement official.
