Libya has said it is closing its embassy in Denmark in protest against a series of caricatures depicting the Prophet Muhammad in a Danish newspaper.
The cartoons have outraged many Muslims around the world
Tripoli said Denmark had failed to act against the Jyllands-Posten's cartoons, which showed Muhammad as a terrorist.
The Danish government has refused to get involved in the issue despite growing anger in the Muslim world.
The newspaper said it did not mean to insult Islam. Islam bans any depiction of Muhammad or Allah.
"Because the Danish media had continued to show disrespect to the Prophet Muhammad and because the Danish authorities failed to take any action on that, Libya decided to close its embassy in Copenhagen," the Libyan foreign ministry said in a statement.
Libya also said it would be taking "economic measures" against Denmark, but did not say what they would be.
Ambassadors from several Muslim countries have complained to Danish Prime Minister Anders Fogh Rasmussen, threatening to boycott Danish goods.
Last week, Saudi Arabia recalled its ambassador from Denmark.
Copenhagen has expressed regret for the furore over the 12 cartoons, but refused to get involved, citing freedom of expression.
"The government can in no way influence the media," Mr Rasmussen said on Sunday.
"And the Danish government and the Danish nation as such cannot be held responsible for what is published in independent media," he added.
Mr Rasmussen was speaking at a joint news conference with visiting Afghan President Hamid Karzai, who said the newspaper's drawings were a mistake.
However, Mr Karzai added: "Prime Minister Rasmussen explained Denmark's position on that (the drawings), which was very satisfactory to me as a Muslim."
The Jyllands-Posten had said earlier it published the drawings to test the boundaries of expression about Islam.
Its editorial on Sunday said it did not mean to insult Islam.
"We at Jyllands-Posten feel regret because the issue has reached this level and we reiterate that we did not mean to insult anybody," it said.
"We believe, like the rest of Danish society, in the respect of freedom of religion."