The clerics of Islamabad's Lal Masjid (Red Mosque) have announced the establishment of a parallel Sharia judicial system.
Maulana Abdul Aziz Ghazi, the mosque's head, said during Friday prayers that members would take part in suicide attacks if the Pakistan government attempted to stop enforcement of its rulings.
Afteb Ahmed Khan Sherpao, the country's interior minister, said that the government would not be cowed by outside threats and said the situation was being closely monitored.
Religious activists, some wearing masks, staged a demonstration before the prayers, chanting "al-Jihad, al-Jihad."
Shopkeepers warned
The men set fire to thousands of CDs and videos which they said contained immoral content and had been voluntary given up by shopowner who had said he wanted to absolve himself of his sins in selling them.
Kamal Hyder, Al Jazeera's correspondent in Islamabad, said: "For the participants and bystanders it is a way of securing your hereafter. But not many here will be convinced that the key to heaven lies in burning movies."
Aziz Ghazi said shopkeepers had been served a 30-day deadline to shut their "evil" businesses and that students from the mosque would take action against those who failed to act.
He also asked other traders to give financial support to the shopkeepers in order to help them set up other businesses instead.
General Pervez Musharraf, Pakistan's president, has previously said that Lal Masjid's has helped suicide bombers and that the bomber who attacked Islamabad's Marriot Hotel in January had been seen near the mosque that day.
Musharraf said he considered the establishment of Sharia law and the burning of a number of tapes and compact discs as un-Islamic acts and pledged not to allow any group to control the destiny of the people of Pakistan.