Pakistan's parliament adopted a resolution condemning the knighthood and said Britain should withdraw it.
Sher Afgan Khan Niazi, minister for parliamentary affairs, told parliament: "This is a source of hurt for Muslims and will encourage people to commit blasphemy against the Prophet Mohammad."
"We demand Britain desist from such actions and withdraw the title of knighthood," he said.
Mohammad Ejaz-ul-Haq, the religious affair minister, said insults to Islam were the cause of terrorism.
"The West always wonders about the root cause of terrorism. Such actions are the root cause of it," he told parliament.
"If Britain doesn't withdraw the award, all Muslim countries should break off diplomatic relations."
Tasnim Aslam, foreign ministry spokeswoman, said the decision to honour Rushdie was insensitive to the sentiments of Muslims.
"We deplore the decision of the British government to knight him. This, we feel, is insensitive and we would convey our sentiments to the British government.
"Salman Rushdie has tried to insult and malign Muslims through his writings and this had provoked very strong reaction and sentiments in the Muslim world," she said.
|Rushdie's book prompted protests by many |
Muslims after it was published in 1988 [AFP]
Ejaz-ul-Haq also told parliament: "If someone commits suicide bombing to protect the honour of the Prophet Mohammad, his act is justified."
A short while later he told parliament he had not meant to justify suicide attacks but he was trying to stress what was at the root of terrorism.
Rushdie's book prompted protests, some violent, by Muslims in many countries after it was published in 1988. The late Iranian Ayatollah Ruhollah Khomeini issued a fatwa death warrant against Rushdie in 1989, forcing him into hiding for nine years.
The UK's twice-yearly honours ritual, designed to recognise outstanding achievement, is part of an ancient awards system.
A total of 946 honours were handed out in the Queen's birthday list, including 21 knighthoods.