The Hong Kong National Party, made up of 30-50 students and young professionals, launched Monday saying it is tapping in to the semi-autonomous city's increasing desire to break away from the mainland.
There have been growing calls for independence from Hong Kong's youth over fears Beijing is seeking to curb freedoms in the city.
The Hong Kong government said advocating independence was against the city's mini-constitution and would "undermine the stability and prosperity of Hong Kong".
China's State Council Hong Kong and Macau Affairs Office also hit out, voicing "resolute opposition" to calls for independence, according to official news agency Xinhua.
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It said the Hong Kong government had "refused to register" the new party, a move it termed "proper".
A Hong Kong National Party member confirmed to AFP today the group had been blocked from registering as a company, which could make it difficult for it to stand in any election.
Hong Kong solicitor and legislator James To said a party had to be officially registered as a company or society in order to feature on a ballot paper.
"It will be difficult" for candidates to run without the registration, To said.
However, some small parties told AFP they had succeeded in doing so, apparently flouting the rules.
The city's electoral office could give no immediate comment on whether the failure to register as a company would prevent the Hong Kong National Party from standing.
Concerns have been fuelled by the disappearance of five Hong Kong booksellers, known for salacious titles critical of Beijing, who later turned up on the mainland.
Four of the men are now under criminal investigation in China and the fifth is flitting between Hong Kong and the mainland, where he says he is "assisting" with the investigation.
The failure of mass protests in 2014 to win political concessions from Beijing have also led to the rise of "localism", dominated by young activists who want more autonomy.