The government has suspended ties with Britain's largest Muslim group and demanded that one of its leaders should be removed from office for allegedly supporting violence against Israel.

The news comes on the eve of the launch of a major government strategy aimed at fostering closer ties with Muslims to help counter the threat of Islamist terrorism.

The launch tomorrow of Contest 2, the government's revised counter-terrorism strategy, comes after ministers decided to stop engaging with the Muslim Council of Britain (MCB).

The council's deputy secretary-general, Daud Abdullah, signed a declaration last month that the government and critics of the MCB have interpreted as calling for violence against Israel and condoning attacks on British troops.

The declaration followed a meeting in Istanbul of clerics and other Muslim leaders from around the world to discuss strategy after Israel's attacks on Gaza.

Hazel Blears, secretary of state for communities and local government, wrote to the MCB saying Abdullah should be asked to "resign his post" for signing a statement that supported Hamas and celebrated its "victory" against "this malicious Jewish Zionist war over Gaza".

Muslims who are sceptical of government anti-terror plans say they cannot think of any other occasion where a cabinet minister has tried to dictate to a religious group about the composition of its leadership.

Abdullah, speaking for the first time about the row, told the Guardian he would not be standing down.

He said of his views: "If British troops were to engage in a breach of international law, it is up to the people of the territory to decide what to do. But as I understand it, under international law, it is their right to resist."

He defended signing the statement, saying: "It made no specific mention of attacks on British troops. The statement does say if foreign troops enter Gaza's territorial waters, it is the duty of Muslims to resist, as it would be seen as assisting the siege."

Later, in an email, Abdullah said: "I did not and do not condone calls for attacks on British troops.

"The British government has not deployed troops to the territorial waters of Gaza and I do not believe it or our parliament would endorse any breach of international law.

"Any discussions about what should or would happen is hypothetical and I cannot speculate."

Blears demanded that the MCB remove Abdullah from office and demanded to know what its leaders planned to do by today.

In her letter, dated 13 March , Blears wrote: "In light of the MCB's unequivocal stance on violence, it would seem that Dr Abdullah's position as the deputy secretary-general would be incompatible with his recent actions."

Blears's letter notes that the MCB would be investigating the matter, but says she was breaking links with the group, which was once seen as vital by the government to building better relations with British Muslims: "Whilst your investigation is ongoing and the matter remains unresolved I feel that it is only appropriate for us to suspend our engagement with the Muslim Council of Britain pending its outcome."

In a statement, the communities and local government department said: "We ... are very concerned that the statement from the event calls for direct support for acts of violence in the Middle East and beyond.

"We are concerned that the MCB have so far not recognised the gravity of this situation. If it is proven that the individual concerned had been a signatory, we would expect them to ask him to resign and for the MCB to confirm their opposition to acts of violent extremism."

An MCB spokesman today condemned the government for trying to interfere in its internal affairs and said the cabinet minister's demand would be ignored: "The MCB is a democratic organisation, with its own affiliates, and they decide who its representatives are, and not Ms Blears."

The Istanbul declaration said: "The obligation of the Islamic Nation [is] to regard the sending of foreign warships into Muslim waters, claiming to control the borders and prevent the smuggling of arms to Gaza, as a declaration of war, a new occupation, sinful aggression, and a clear violation of the sovereignty of the Nation. This must be rejected and fought by all means and ways."

During the Gaza conflict, Gordon Brown suggested sending forces to help stop weapons smuggling into Gaza.