The Israeli media also reported that some of the Islamic Movement's bank accounts had been frozen by the authorities.
The Al-Aqsa institution was established to defend the mosque in Jerusalem's Old City - considered the third holiest site in Islam - from nearby construction projects and other actions it views as threats to the site.
"The horrible closure of the al-Aqsa foundation comes for only one reason; because the al-Aqsa foundation reveals the truth to the whole world," Sheikh Raad Salah, head of the Islamic Movment in northern Israel told Al Jazeera.
"This truth terrifies Israel and discloses the horrible crimes of the Israeli occupation authorities in al-Quds [Jerusalem] and in the holy al-Aqsa Mosque."
|The al-Aqsa institution was set up to protect the holy site [File: AFP]
Salah aid that the homes of several employees of the al-Aqsa institution had also been raided.
"For example, they have raided the house of Ali Abu Sheikha, head of the al-Aqsa Foundation, and scattered all its contents," he said by telephone from Umm al-Fahm.
Salah indicated that he believed the raids were a reaction to a news conference given two weeks during which he said revealed that a number of Israeli projects posed a threat to the al-Aqsa mosque and the old city of Jerusalem.
"All this has pushed Israel to do such a childish, unreasonable action and raid the office of al-Aqsa Foundation for the Reconstruction of Islamic Sanctities," he said.
In August 2007, Salah was indicted for "inciting racism and violence" for calling for a "third Intifada," or uprising, to defend the mosque.
On Friday, tens of thousands of people attended an Islamic Movement rally in Umm al-Fahm to highlight what the group says are threats to the monument, which is built on Judaism's holiest site.
The Islamic Movement, which was founded in 1970, has two MPs in the Israeli parliament.
Israel and Hamas- which took full control of the Gaza Strip after forcing out security forces loyal to Mahmoud Abbas, the Palestinian president in June 2007 - have been observing an easy truce aimed at ending rocket attacks and stopping Israeli raids.
On Thursday, Jordan lodged a protest against plans to carry out excavation and construction work near the al-Aqsa mosque compound which officials in Amman say violates a 1994 peace treaty.
Mohammed Abu Hdeib, head of the lower house of parliament's committee on international affairs, told the AFP news agency that the planned work "threatens the foundations of Al-Aqsa".
He warned that this could "lead to a new violent conflict in the Middle East because Jerusalem is a red line for Muslims and Arabs".
In February last year, Israel began excavation work on a pathway leading from the Western Wall to the compound sparking Muslim outrage and prompting the UN cultural organisation to call for an immediate halt to the work. The Jerusalem mayor's office suspended work the same month.