Deputy Prime Minister and Minister of Higher Education Hossam Eissa announced the government's decision, media said. (Agencies)
The move came a day after a deadly bomb attack in the Nile delta city of Mansoura in which at least 16 people were killed and 130 others injured.
Ousted Islamist president Mohamed Morsi belongs to the Brotherhood.
Eissa said the terrorism law will be enforced on anyone who participates, finances or propagates the activities of the group.
He said the Brotherhood has been practicing violence for a long time, and accused it of seeking to disturb Egypt's transition to democracy.
On Tuesday, Interim Prime Minister Hazem el-Beblawi had also declared the Brotherhood a terrorist group, a news agency reported.
"The Brotherhood has shown its ugly face as a terrorist group and its acts will not weaken the Egyptian people's determination to move forward," Beblawi was quoted as saying.
In October, Egyptian authorities ordered to remove the Brotherhood from a government list of accredited non-governmental organizations.
Deputy Prime Minister and Minister of Higher Education Hossam Eissa announced the government's decision, media said.