There are about 1.6 million Muslims in the UK out of an overall population of about 60 million, according to the last census in 2001.
"I think there is a danger that the word 'Muslim' in the UK is becoming synonymous with bad news"
Muhammad Abdul Bari, head of Muslim Council of Britain
Abul Bari's comments follow remarks by Jonathan Evans, the new head of the UK's domestic intelligence agency, MI5, in which he said there were 2,000 people living in the UK who posed a terrorism-related danger.
He also said that extremists from organisations such as al-Qaeda were targeting children.
Bari said he thought that Evans' speech was "creating a scare in the community and wider society".
"What you had in the 1930s was all sorts of popular fictions were spread about the Jewish community that they were responsible for all ills that were occurring to Germany," he said.
"They were made into folk-devils and I think there is a danger that the word 'Muslim' in the UK is becoming synonymous with bad news."
He also said it was wrong to describe people as Islamic terrorists, saying people never called the Irish Republican Army (IRA) "Catholic terrorists".
The Muslim Council of Britain is one of the largest and most influential groups representing British Muslims.
The UK's Home Office issued a statement in response to Abdul Bari's comments, saying it wanted to work with Muslims "to increase their sense of inclusion."
"Through open dialogue we can discuss concerns, explain policies and foster greater understanding," it said.