Aljazeera spokesman Jihad Ballout expressed his disbelief at the decision and vowed to step up the campaign to have the star reporter released.
"We are convinced of Taysir Alluni's innocence and we have every confidence in the impartiality of Spanish justice," said Ballout on Thursday.
Ahmad Kamil, Aljazeera's correspondent in Madrid, said the decision was much more than a disappointment.
"There will be consequences, there will be demonstrations in the Arab world and appeals to boycott tourism and Spanish products," said Kamil.
But Judge Baltasar Garzon determined there was sufficient evidence to hold the 56-year-old further and not release him after his week long detention.
A copy of his decision says evidence suggests Alluni joined an Islamist group in 1995 that may be a support group for al-Qaida.
"There will be consequences, there will be demonstrations in the Arab world and appeals to boycott tourism and Spanish products"
Alluni, a Spanish citizen of Syrian origin, was arrested while on holiday in Granada last Friday. Aljazeera has appointed a lawyer to defend him.
Defence sources described the decision as a surprise as they had hoped "either for his release or at least a conditional release."
Alluni, who found fame in the Arab world for exclusive reporting from Afghanistan during the US war on the Taliban - he interviewed among others al-Qaida figurehead Usama bin Ladin - was arrested on Garzon's orders as part of his investigation into Islamic "militant" operations.
Police suspect Alluni of links to members of the al-Qaida network, including Imad al-Din Barakat Yarkas, alias Abu Dahdah, who was arrested on suspicion of being the ringleader of an eight-strong Islamist group which Spanish authorities dismantled in November 2001.
Spain's judge Baltasar Garzon
interrogated Alluni all week
The group is suspected of having helped to prepare the 11 September attacks, though US authorities have not applied for his extradition.
In a letter addressed to Spanish Prime Minister Jose Maria Aznar on Wednesday, Aljazeera's director Shaikh Hamad bin Thamir al-Thani urged Alluni be freed.
Madrid should give the matter "the importance it deserves", he wrote. Alluni has categorically denied any ties to al-Qaida.
Aljazeera has learned that the prison officers are not tending to Alluni's dietary needs, despite his religious and health stipulations.
Meanwhile, the team at Aljazeera's London bureau held a silent sit-in before the Spanish embassy, in protest against Alluni's extended detention.
The protesters handed over a letter of protest to the Spanish ambassador calling for Alluni to be freed soon.
In related developments, a source close to the case said Alluni had delivered money for a wedding in Afghanistan and not "terrorist" activities.
The unnamed source refuted other accusations made in the prosecutor's case, saying Alluni's acts of hospitality were wrongly misinterpreted as collaboration with al-Qaida.
The source said Alluni delivered money to people in Afghanistan and Turkey three or four times on behalf of Syrians who knew he would be travelling in the region.