India has frozen the national bank accounts of Greenpeace, accusing it of violating the country's tax laws and working against its economic interests.
In a long-running dispute, India accused the environmental group of "stalling development projects" by protesting against large infrastructure plans.
Greenpeace India rejected the six-month restrictions as "clear attempts to silence criticism and dissent".
It said it complies with the law governing foreign contributions.
In its suspension order, the Indian government accuses Greenpeace of not fully declaring the amount of foreign funds it brings into the country.
It has suspended all its bank accounts for six months and threatened to permanently cancel the registration which allows it to operate in the country.
Greenpeace India said it was yet to receive an official notice but described the move as a campaign by the government against dissent.
The government and Greenpeace have been locked in confrontation for several months over a number of campaigns the group has been running against large projects.
Last month, the non-governmental organisation claimed a victory when the government recommended the Mahan forests in Madhya Pradesh not be auctioned for coal mining.
The government accuses Greenpeace of blocking India's development.
A senior government official told Reuters: "We have evidence to prove that Greenpeace has been mis-reporting their funds and using their unaccounted foreign aid to stall crucial development projects."
But the organisation says it has been, and will continue to be, compliant with the law governing foreign contributions and is only highlighting the impact of projects on the environment and rural communities.
Since coming to power in May last year, PM Narendra Modi's government has pushed through a series of long-awaited reforms and new policies making it easier for companies to win approval for new projects.
Greenpeace activists have accused him of watering down environmental rules after it allowed industries to operate closer to protected green zones.
Divya Raghunandan, Greenpeace India's programme director, said: "We are being repeatedly targeted because we are protesting against the government's unlawful policies."