The new ordinance, agreed by the federal government on Wednesday, comes into effect on Thursday for an initial period of six months.
A government statement said: “The Islamic State Group commits grave violations of human rights. Due to the escalation in its atrocities in the past few weeks, the Federal Council today decided to ban the group.”
The ordinance prohibits any activities by Islamic State within Switzerland and abroad, plus any activities that support or promote Isis.
That could include propaganda and fundraising campaigns, or the recruitment of new members.
Offenders could receive a prison sentence of up to three years or a fine. Where applicable offending organizations will have their assets seized.
The move comes after recent reports on the presence of jihadists in Switzerland, as well as escalating atrocities in Syria and Iraq, which have included several beheadings of British, French and American civilians.
At the end of September Swiss media reported that three Iraqis arrested in Switzerland in March were suspected of planning pro-Isis attacks and helping 40 Swiss residents travel to the Middle East to join Isis.
Recent developments represent a “threat to the internal and external security of Switzerland,” said the government.
The ordinance is only a temporary measure and not a federal law, though the government has tasked the Federal Department of Defence, Civil Protection and Sports (DDPS) with submitting a proposal to guarantee the prohibition of Islamic State and other terror organizations including Al-Qaeda.
Switzerland’s ban on Al-Qaeda was imposed following the 2001 attack on the World Trade Centre in New York but is due to expire at the end of this year.
Germany banned Islamic State in September after security agencies estimated 400 people from Germany had joined the organization.
The decree closed a legal loop hole that made it difficult to prosecute Islamic State supporters in Germany.
In August the Netherlands banned the black flag of the Islamic State from public demonstrations.