"We announced the ability to withhold content back in Jan (January)," Twitter's chief lawyer Alex Macgillivray said in a message posted on the website.
"We're using it now for the first time re: a group deemed illegal in Germany."
In a separate tweet, Macgillivray posted a link to a letter from the police in the northern German state of Lower Saxony asking Twitter to block the account of Besseres Hannover, a far-right outfit which was outlawed last month.
The account is still visible on Twitter with the handle @hannoverticker and calling itself "Das nationale Informationsportal aus Hannover" (The national information portal from Hanover).
But no message since the date of the ban, September 25, is visible in Germany, and the group's website has also been blocked or deleted.
The letter from the Hanover police department posted in English and German on the Chilling Effects website cites the ban on the extremist group by the interior ministry of Lower Saxony.
"It is the task of the Polizeidirektion Hannover (Hannover Police) to enforce the ban," it said.
"I ask you to close this account immediately and not to open any substitute accounts for the organisation 'Besseres Hannover'."
Prosecutors in Lower Saxony have launched a probe against around 20 members of Besseres Hannover on charges of inciting racial hatred and creating a criminal organisation.
The group is in particular suspected of sending a threatening video to the state's social affairs minister, Aygul Ozkan, who is of Turkish origin.
Macgillivray said in a further post that Twitter aimed to restrict as little as possible on its website while complying with the law. "Never want to withhold content; good to have tools to do it narrowly & transparently," he said.
He posted a link to the company's policy on "Country-Withheld Content" outlining the line it draws between free speech and legal compliance.
"With hundreds of millions of Tweets posted every day around the world, our goal is to respect our users' expression, while also taking into consideration applicable local laws," the California-based company said.
"Many countries, including the United States, have laws that may apply to Tweets and/or Twitter account content. In our continuing effort to make our services available to users everywhere, if we receive a valid and properly scoped request from an authorized entity, it may be necessary to reactively withhold access to certain content in a particular country from time to time."
It said once it received an official request to withhold content, it would notify users immediately explaining why their posts could pose legal problems for Twitter.
It said it was working with anti-censorship group Chilling Effects to publish such requests by authorities unless it is legally prohibited from doing so.
"We strongly believe that the open and free exchange of information has a positive global impact, and that the Tweets must continue to flow," the company said.