Government plans that could see the closure of mosques suspected of inciting extremism have been attacked by Muslim leaders.
Sir Iqbal called for a public inquiry into the July bombings
Sir Iqbal Sacranie said the move would "criminalise an entire community for the criminality carried out by a few".
The Muslim Council of Britain secretary general made his comments in a speech to an east London conference focusing on the role of Muslims in the UK.
But he added loyalty to the UK was not incompatible with the Muslim faith.
Met Assistant Commissioner Tarique Ghaffur and the Lord Chancellor Lord Falconer are among the other figures addressing more than 20,000 people at the Global Peace and Unity conference.
Sir Iqbal described the government proposals designed to tackle terrorism the "single most dangerous piece of legislation".
Under the plans, police could seek a court order for the temporary closure of a place of worship if extremist behaviour or terrorist activity was believed to be taking place.
Mosques were not specifically singled out in the proposal but most people would see the proposal as referring to mosques and trustees of mosques, the MCB has said.
The comments follow a recent warning by the Association of Chief Police Officers that the plan could be seen as an attack on religion.
Assistant Chief Constable Rob Beckley, who is responsible for community relations at the association, said if officers had suspicions about a particular mosque they would want to identify those responsible rather than close it down.
Sir Iqbal also used his speech to call for a public inquiry into the 7 July London bomb attacks.
The MCB's Sher Khan said the gathering at the Excel centre fulfilled a "very important need to clarify to the wider community that British Muslims are part and parcel of the wider community".