Serving soldiers have been warned that taking part in any English Defence League activities could result in their dismissal.
Defence minister Mark Francois, in a written Parliamentary answer, said that the Army chain of command had been contacted with clear instructions to ensure all service personnel refrained from engaging in any political behaviour, after photos emerged showing what appeared to be serving soldiers brandishing firearms against a backdrop of EDL propaganda.
Heightened tensions following the murder of Drummer Lee Rigby in Woolwich, south east London, by Islamist extremists have prompted concerns over possible links between the Armed Forces and far right groups.
"In the wake of the appalling murder of Drummer Rigby, General Sir David Richards, Chief of the Defence Staff, wrote to all ranks on 23 May both to express his sympathy for Drummer Rigby's family and to urge all service personnel not to get drawn into the politics of this incident," Mr Francois said.
"General Richards was clear that the UK Armed Forces fight to protect people of every creed. On 30 May, Sir Peter Wall, Chief of the General Staff, wrote to all Army Commanders and Commanding Officers to reiterate that Queen's Regulations forbid Regular Service personnel in uniform from taking an active part in the affairs of any political organisation party or movement, or participating in political marches or demonstrations."
He added: "All Service personnel are expected to abide by the values and standards of the British Armed Forces in all they do. All those who are found to fall short of these high standards or have committed an offence under the Armed Forces Act are dealt with administratively or through the disciplinary process. Ultimately, such action may result in dismissal."
Mr Francois's comments were prompted by a Parliamentary Question from former British Army officer Dan Jarvis.
The Labour MP for Barnsley Central, who attended Sandhurst as an officer cadet, had asked the Ministry of Defence what advice had been issued to Army personnel regarding EDL membership, attending rallies and their conduct on social media.
The EDL, which as of 25 May described itself on its website as an "inclusive movement dedicated to peacefully protesting against Islamic extremism" also has a Facebook page representing the Armed Forces Division. On 2 June, EDL leader Tommy Robinson tweeted: "Armed Forces support EDL, EDL support Armed Forces."
Accompanying the tweet was a photo of what looked like a masked British soldier posing with a weapon in front of an army truck emblazoned with an EDL flag.
Following the apparent outbreak of Islamophobia on social media used by serving ranks, former Conservative defence minister, Sir Gerald Howarth, called for an investigation into apparent links between extremist groups and the Armed Forces.
"These photographs should be investigated to determine if current or former soldiers are involved and action should be taken," he told the Sunday Express newspaper over the weekend.
"They need to discover where these weapons are coming from."