Troops are moving in to wrest control of the Lalgarh area from rebels
The Indian government has banned the Maoist Communist Party of India as a terrorist group, giving security forces enhanced powers of arrest.
The move provides Indian police with the power to detain members of the party even if they have not been involved in insurgent activity.
Earlier, five states across east and central India were put on a high alert as the Maoists called a two-day strike.
One district in West Bengal briefly fell under almost total Maoist control.
The rebels said the strike they declared was in response to the "war" on people in Lalgarh, West Bengal, where security forces launched an offensive in recent days.
Lalgarh had been under the virtual control of the rebels since November.
But police and paramilitary troops have been attempting to consolidate their grip on the jungle enclave over which they re-established control over the weekend.
Monday's strike began a day after 11 police officers died in a rebel attack in Chhattisgarh state and two days after 16 policemen were killed in landmine blasts triggered by the Maoists in the same state.
Issuing a high alert for the five states in which the strike was declared, the interior ministry said India's federal Intelligence Bureau had "specific inputs" that Maoists were planning possible attacks.
"Security forces, as well as economic infrastructure like railways, buses and crowded markets, may be targeted by the Maoists to make their presence felt during the strike," the interior ministry advisory said.
India's prime minister, Manmohan Singh, has described the Maoists as the greatest threat to India's internal security.
The ban on the Communist Party of India (Maoist) comes just a month after the Congress party won a decisive victory in elections - leaving it with no need to turn to communist parties for support in shoring up a coalition.
Correspondents say it is unclear how big an impact the ban will have in the fight against the rebels.
Villagers in Lalgarh say their young men are being forced by police to hunt for explosives planted by the Maoists.
Artists are trying to broker peace between rebels and the government
"They are giving the village boys an S-shaped iron rod each, asking them to hook it to wires sticking out anywhere and pull it. This is dangerous because they will be too close to the explosives if the wires are linked to them," said Chattradhar Mahato, chairman of the Peoples Committee on Police Atrocities (PCPA), active in the Lalgarh area.
Some of Bengal's leading artists, including film-maker Aparna Sen, visited Lalgarh on Sunday in a attempt to broker peace between the West Bengal government and the Maoists.
But neither appeared to be in a mood to talk.
"The Maoists have no specific demand, they are just out to create trouble. We have to continue the operations to deal with them," said Bengal's chief secretary Ashok Mohan Chakrabarty.
Maoist leader Kishneji told the BBC: "We will show the government what is people's power. No police or army can crush that."
Thousands of villagers have fled their homes in the Lalgarh region to avoid getting caught in the fighting, heading towards neighbouring areas of Bankura district.
The Bengal government started the offensive to retake Lalgarh, which had effectively been under Maoist control since November.
The Maoists skilfully harnessed people's anger over police excesses following an Maoist attempt to kill chief minister Buddha Bhattacharya through a landmine blast, says the BBC's Subir Bhaumik in Calcutta.
Maoist-linked violence has killed 6,000 people in India over two decades.