Seehofer said the group, also known as “Wolfsbrigade 44”, “sows hatred” and “advocates the re-establishment of a Nazi state”.
“Anyone who fights against the fundamental values of our liberal society will feel the determined reaction of the constitutional state,” the minister said in a statement.
Early on Tuesday, almost 200 police officers began searches of premises linked to 11 alleged members of the group in a number of regional states.
Police found weapons, including knives and crossbows, as well as propaganda items such as swastikas and Nazi flags, the interior ministry said.
Members “openly declared their support for Adolf Hitler”, the ministry said, adding that the group was “particularly characterised by militaristic appearance” and “pronounced racism” as part of an “inhuman ideology”.
In July last year, prosecutors raided apartments in several German states of members accused of being part of the group, which was founded in 2016.
Six were suspected of having formed an armed group within the organisation, authorities said at the time.
The news comes amid continued heightened tension surrounding far-right extremism in Germany.
Last month, federal prosecutors charged 12 alleged far-right conspirators suspected of planning “terrorist attacks” on politicians, asylum-seekers and Muslims.
In February, a far-right extremist killed 10 people and wounded five others in the central German city of Hanau.
And last year, two people were killed after a neo-Nazi tried to enter a synagogue in Halle on the Jewish holiday of Yom Kippur.
The Interior Ministry has said far-right and anti-Semitic hate crime spiked in the country in 2019.
Seehofer already banned three other right-wing extremist groups earlier this year, “Combat 18”, “Nordadler” and the “Reichsbuerger-Vereinigung”.