The Defense Ministry says Avigdor Lieberman revoked the permit of Mohammed Al-Madani because he tried to create a political party that included Arab citizens of Israel and Mizrahi Jews, or those of Middle Eastern descent.
The VIP permit allowed Al-Madani to enter Israeli territory without long waits at checkpoints.
Al-Madani said he met with hundreds of Israelis across the political spectrum in an attempt to reactivate the moribund peace process and reach a two-state solution to the Israeli-Palestinian conflict. He denied he was starting a party.
Moroccan-born Reuven Abergel, a longtime Mizrahi activist, called Wednesday's announcement "patronizing." He said he met with Al-Madani two years ago to discuss peace, but not to found a party.
"A democratic state doesn't shut its people's mouths and prevent them from creating dialogue," he said.
The firebrand Lieberman was appointed last month to replace Moshe Yaalon, a former military chief of staff who was forced out after siding with his commanders in disagreements with political hawks.
He also led a failed attempt to require Israel's Arab citizens to take a loyalty oath, and said Arab citizens who meet with members of the militant Islamic group Hamas should be executed.
He was appointed as Israel contends with a nine-month wave of Palestinian shooting, stabbing and vehicular attacks that have killed 32 Israelis and two Americans. Some 200 Palestinians have died in that time, the majority of whom Israel says were attackers.
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