A senior judge has said the Real IRA is not a proscribed organisation after he cleared four men of being members.
The landmark ruling was made by Mr Justice Girvan and it is thought it could have far reaching legal and political ramifications.
At Belfast Crown Court on Wednesday, he said under current legislation an organisation is proscribed only if it is listed or operates under the same name as a listed organisation.
The judge said while the relevant schedule listed the IRA, he added: "Schedule 2 of the Act does not include any organisation called or known as the Real Irish Republican Army."
His decision rules out the possibility of any member of the dissident group being convicted solely of membership of the Real IRA.
The paramilitary group was behind the 1998 Omagh bombing, in which 29 people died.
A Northern Ireland Office spokesman said: "The government is very concerned at this ruling and the DPP (Director of Public Prosecutions) is forwarding a report to the Attorney General with a view to an appeal.
"The government is clear that RIRA should be a proscribed organisation."
The prosecution contended that because the RIRA was named as a separate organisation under the earlier Northern Ireland Sentencing Act 1998, the dissidents were operating under the name of the IRA and therefore the absence of the word "Real" did not detract from that fact.
However, Mr Justice Girvan said he "must reject the Crown argument".
"The Real Irish Republican Army is identified by the state under the 1998 Act as a separate and distinct organisation whose adherents in the eyes of the law merit different treatment from members of the Irish Republican Army who signed up to a ceasefire," said the judge.
Although acquitted of membership, the four County Tyrone men are still on trial accused of conspiracy to murder and possession of a rocket launcher in February 2002.
The prosecution case is due to finish on Thursday, when the defence team is expected to argue for the men's acquittal.
They are 33-year-old Donald Mullan from Firmount Park, Dungannon, Coalisland men Sean Dillion, 27, of Roughan Way and Kevin Murphy, 33, of Altmore Park, and 26-year-old Brendan O'Connor of Cavanoneill Road, Pomeroy.
Michael Gallagher, whose son Aidan was killed in the Omagh bombing, said: "This is an organisation that's hell-bent on creating death and devastation.
"It just leaves you without words that something like this can happen."