"British Muslims must be at the heart of the creation of new counter-terrorism legislation if it is to be effective," Muslim Council of Britain (MCB) said.
MCB Assistant Secretary General Miqdaad Versi said the authorities were making a grave mistake by conflating socially conservative views with violent extremism.
"The current policy has a real risk of being counterproductive with alienation being fermented as a result. "Unless the government talks to Muslims from a diverse region of communities from across the UK we will not see this change,” he said.
The statements come as a recent survey said most British Muslims believe that misguided government policies and biased media coverage have created an "environment of hate" that affects their daily lives.
The survey conducted by the London-based Islamic Human Rights Commission also showed that everyday life for Muslims in Britain is characterized by rising levels of abuse, discrimination and violence.
According to the report, more than 80 percent of respondents said they had seen "Islamophobia directed at someone else," up from 50 percent in 2010, while the proportion who had witnessed "negative stereotypes about Islam and Muslims" rose from 69 percent to 93 percent.
Meanwhile, some 56 percent of the Muslims reported experiencing verbal abuse, and 18 percent said they had been victims of physical assault.
Earlier, British Prime Minister David Cameron promised last month more support for Muslims after police recorded a 43 percent rise in religious hate crime in the year to March.
Cameron asked police forces to record anti-Muslim hate crimes in a separate category, giving such crimes the same status as anti-Semitic attacks, the government said.