"Police forces currently available are not in a position to meet the forecasted developments in the situation," said Saxony regional authorities in a statement announcing a ban on all outdoor public gatherings from Friday 2pm to Monday 6am.
Any demonstrations planned by far-right activists would therefore also be banned.
"It cannot be ruled out that violent clashes could arise," it said, adding that the "lives and health of participants at public gatherings, bystanders but also police and security officers" could be at risk.
They were condemned by Chancellor Angela Merkel as "vile", and she also had strong words for families with children who marched alongside the demonstration, calling their support "shameful".
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Her visit to the refugee shelter in Heidenau on Wednesday was met with a show of defiance by about 200 people, some of whom greeted her with jeers and shouted far-right slogans including "traitor, traitor".
Germany is expecting to receive a record number of 800,000 asylum-seekers this year, four times higher than the number in 2014.