Myanmar's government says it will not allow the Organisation of Islamic Co-operation (OIC) group to open a liaison office after thousands of Buddhist monks and laymen marched in protest against the plan.
Myanmar and the OIC agreed last month to open an office to provide aid for Muslims displaced by the fighting.
The information ministry said on its website pn Monday that the opening of the office would not be allowed because it was not wanted by Myanmar's people.
"We cannot accept any OIC office here," Oattamathara, a monk leading the protests in Mandalay, Myanmar's economic and cultural hub, told the AFP news agency.
A statement posted on the presidential website reflected this: "The government will not allow the opening of an OIC office as it is not in accordance with the desire of people."
Religious tensions are running high following Buddhist-Rohingya clashes in June in western Rakhine which left dozens of people dead and forced tens of thousands to seek refuge in temporary shelters.
Monks were at the vanguard of a 2007 pro-democracy uprising that was brutally crushed by the former junta.
They have been involved in a series of protests against the OIC and Myanmar's 800,000 stateless Rohingya, who are described by the UN as one of the world's most persecuted minorities.
Members of the 57-member OIC toured Rakhine last month after accusations from rights groups that security forces opened fire on Rohingya during the unrest, prompting concern across the Islamic world.
Myanmar's Rohingya, who speak a dialect similar to neighbouring Bangladesh's Bengali language, are seen by the government and many Burmese as illegal immigrants.
The tensions in Rakhine have spread to Bangladesh, where police said recently they had arrested nearly 300 people in connection with a wave of violence targeting Buddhist homes and temples.