The English Defence League (EDL) intended to march next Saturday while Unite Against Fascism were organising an opposing protest the same day.
Home Secretary Theresa May has now authorised a blanket ban on marches in the city following a major campaign to stop the event, including a 10,000-signature petition which was handed in to the Home Office earlier this month. But the move does not prevent demonstrations from being held.
A Home Office spokesman said: "Having carefully balanced rights to protest against the need to ensure local communities and property are protected, the Home Secretary gave her consent to a Bradford Council order banning any marches in the city over the bank holiday weekend.
"West Yorkshire Police are committed to using their powers to ensure communities and property are protected and we encourage all local people to work with the police to ensure community cohesion is not undermined by public disorder."
The proposed confrontation has raised fears of serious disorder and a possible repeat of the devastating 2001 riots. Some commentators said the clash was an attempt to provoke trouble in a city still recovering from the violence that followed an attempted march by the National Front nine years ago.
Serious disorder has followed some EDL protests elsewhere, including in Bolton, and Stoke-on-Trent where 17 people were arrested and four police officers injured when EDL members tried to break through a cordon preventing them from clashing with members of anti-fascist groups.
Policing the protest and counter demonstration in Leeds last October, which resulted in nine arrests, cost taxpayers 345,000.
In a letter to Bradford Council, Crime Prevention Minister James Brokenshire said the Government "fully understands local concerns that such a demonstration has the potential to spark public disorder and to impact on community cohesion, particularly given the disturbances in Bradford in 2001".
He added: "The application from the Chief Constable of West Yorkshire Police is clear that the activities of some who attend English Defence League protests – and indeed counter protests – has little to do with freedom of expression.
"So while the Government has set out its commitment to restore rights to non-violent protest, we are equally clear that such rights do not extend to intimidation, harassment and criminality, and that rights to protest need to be balanced against the wider rights of local communities.
"Demonstrations should not and cannot be cover for violent, intimidating or criminal acts. The Government condemns those who seek to create distrust and divisions between communities and remains determined to stamp out racism and extremism."
Mr Brokenshire said the police had the power to impose conditions on the size, location and duration of a static protest if they believe it will result in serious public disorder.
Officers may also be needed to provide an escort for groups to the place where a protest is being held but "any such escort would be to safeguard local communities and should not be misinterpreted as a breach of the ban on marches".
A spokesman for the Hope Not Hate campaign said they would be holding a peace vigil in the city centre.
"In the event of the EDL holding a static protest, Bradford Together will organise a peace vigil in Bradford city centre on the Friday."
The secretive leader of the English Defence League was identified on Friday night as Paul Harris, of Luton.
Mr Harris, who has previously used "Tommy Robinson" as a pseudonym, made speeches at EDL demonstrations wearing a mask and hood.
In an interview on Channel 4 News, Mr Harris said: "I'm not fascist. I'm not racist. It's not about that.
"I understand they don't want us there because they are worried about what the hostile, violent, Muslim community is going to do.
"We do not want trouble.
"We want to exercise our democratic right to protest.
"We have a lot of support in Bradford.
"People are fearful of the Muslim community there and what they might do."
On their website, the EDL confirmed "Tommy Robinson" was Paul Harris, a white British man, of Luton.