The organization, also commonly known as ISIS, has been on the list of terrorist organizations since August, 2012, under its previous incarnation as al-Qaeda in Iraq. In a release Wednesday, the Department of Public Safety said it would now list the group as Islamic State.
The release said the update demonstrates the government's "commitment to ensuring that the list reflects the evolving nature of terrorist entities."
The Criminal Code includes penalties for individuals and organizations that handle property or finances for listed groups, and makes it a crime to knowingly associate with a listed organization to carry out or support terrorist activity.
A report from the department released last month said as that of February 2014, about 160 Canadians were known to be fighting with foreign terrorist organizations and a further 80 are believed to have returned to Canada.
A 20-year-old Hamilton man alleged to have been fighting for ISIS was reported killed last week in Kurdish strikes against the militants in northern Syria.
Al-Qaeda in Iraq arose in response to the U.S. invasion in 2003 and was active in the Sunni insurgency in Iraq, although the government says its roots extend back further, to Jordan in the early 1990s. When civil war broke out along sectarian lines in Syria in 2011, many of those insurgents crossed the border to fight with other al-Qaeda-affiliated groups against the Shia regime of Syrian President Bashar al-Assad.
The group has since renamed itself variously as the Islamic State in Iraq and Syria (ISIS), or the Islamic State in Iraq and the Levant, using the name for the wider cultural region on the Eastern Mediterranean, but now simply goes by Islamic State.
"The despicable actions of the Islamic State meet the legal threshold set out in the Criminal Code, which requires the existence of reasonable grounds to believe that an entity has knowingly participated in or facilitated a terrorist activity or is knowingly acting on behalf of, at the direction of, or in association with such an entity," the release from the department said.