Punch newspaper reported on Saturday that a court in Abuja had granted an order permitting the government to label the IMN's activities "terrorism and illegality".
The authorities need to publish the order in the state gazette and two newspapers for it to come into force.
Court and justice ministry sources confirmed the authenticity of the order. The government did not comment officially, according to AFP.
At a news conference in Abuja on Sunday, senior IMN official Yahiya Dahiru condemned the move as a "dangerous development".
"You can never stop an ideology, you can never stop an idea, you can never stop our religion," he said, insisting protests would not stop until Sheikh Ibrahim al-Zakzaky, Nigeria’s top Shia cleric and leader of IMN, was freed.
IMN members have been marching in the capital Abuja and other cities for months calling for the release of Zakzaky, who has been in detention despite a court order to release him.
Zakzaky’s office said plans to ban the movement had been considered since 2015 and it was not surprised by the move.
The protests have been peaceful but police and security forces have often violently attacked the protesters killing many of them. The IMN said at least 20 of its members were killed this week during a series of protests in Abuja. No official death toll has been released by police.
The latest round of protests and the ensuing deadly crackdown has raised concerns, with rights groups calling for an investigation into the killings.
"The Nigerian police's apparent rush to use firearms against Shia movement protesters is unlawful and counterproductive," said Anietie Ewang, Nigeria researcher at Human Rights Watch, in a statement on Wednesday.
"The authorities should bring an end to their violent crackdown on the Shia Islamic Movement in Nigeria, and investigate the excessive use of force by the police," she added.
Zakzaky has been in detention since December 2015 after his residence in the city of Zaria was raided by Nigeria’s forces, during which he was beaten and lost vision in his left eye.
During the brutal arrest, three of his sons were also killed, his wife sustained serious wounds, and more than 300 of his followers were killed.
Zakzaky was charged in April 2018 with murder, culpable homicide, unlawful assembly, disruption of public peace, and other accusations. He has pleaded not guilty, vehemently rejecting all accusations brought up against him.
Recent reports said that his health has been deteriorating, but prison authorities have prevented him from getting much-needed treatment.
Earlier this month, Zakzaky's son said after visiting him that he had been shocked by his father’s worsening medical condition, stressing that he needed to be immediately hospitalized as “large and dangerous quantities of lead and cadmium have been found in his blood.”
He added that Nigerian authorities had not taken any action so far and that they intended to murder his father.
In 2016, Nigeria’s federal high court ordered Zakzaky’s unconditional release from jail following a trial, but the government has so far refused to set him free.