The decision to outlaw the outfit was taken at a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi.
"The NSCN(K) responsible for explosions, ambushes and bombings has been declared as an unlawful organisation for a period of five years," Communications Minister Ravi Shankar Prasad told reporters after the Cabinet meeting.
Prasad said the decision was taken after deliberations that took into account the recent activities of the insurgent group.
The ban came days after the National Investigation Agency, probing the June 4 ambush in Manipur which left 18 armymen dead, declared a reward of Rs 7 lakh for information about Khaplang, believed to be in Taga, a border town in Myanmar, and Rs 10 lakh for one of his deputies Niki Sumi.
NSCN(K) has a strength of around 1,000 cadres with several camps across the border, a few of which were attacked by Indians Army commandos on June 9.
A delegation of Naga civil society, with government's consent, has already gone to Myanmar to persuade Khaplang to come to the negotiating table.
"This has been done based on objective evidence after elaborate considerations," Prasad said.
Union Home Secretary Rajiv Mehrishi said the NSCN-K was declared a banned organisation after deliberations and following due legal process.
Prasad said the NDA government wants to have dialogue with all insurgent groups in the North East as per a policy announced by the the Atal Bihari Vajpayee government.
While the Home Ministry officials had been insisting on banning it, government-appointed interlocutor for Naga peace talks R N Ravi was reportedly in favour of restarting negotiations with the group.
