Germany will step up surveillance of a radical wing of the far-right Alternative for Germany (AfD) party after the domestic intelligence agency designated it as an extremist entity that threatens democracy.

Thursday's decision by the BfV intelligence agency to increase monitoring of "Der Fluegel"— The Wing — deals a blow to Germany's biggest opposition party, undermining its efforts to fend off accusations that it harbors racist views.

The AfD has ridden a wave of anger at Chancellor Angela Merkel's 2015 decision to welcome almost 1 million asylum seekers, and the BfV decision follows fatal attacks on Jews, Muslims and a liberal politician in Germany.