The government has warned councils of "severe penalties" if they impose boycotts on trade and investment with Israel - in a move the Labour leader's office said would have outlawed boycotts against apartheid South Africa.
The Cabinet office will publish guidance later this week stating locally-imposed boycotts are "inappropriate" unless government-sanctioned.
A spokesman for Jeremy Corbyn called the plans "an attack on local democracy".
The guidance will warn that boycotts risk breaching a World Trade Organisation agreement signed by both the EU and Israel, which requires equal treatment for suppliers from all signatory nations.
And the Cabinet Office said that town hall boycotts can also "undermine good community relations, poisoning and polarising debate, weakening integration and fuelling anti-Semitism", as well as hindering Britain's export trade and harming international relationships.
Cabinet Office Minister Matthew Hancock is expected to say on a visit to Israel this week: "We need to challenge and prevent these divisive town hall boycotts. The new guidance on procurement, combined with changes we are making to how pension pots can be invested, will help prevent damaging and counter-productive local foreign policies undermining our national security."
The new guidance will apply to all public bodies, including central government and the NHS as well as quangos and councils. Any public body found to be in breach of the regulations could be subject to severe penalties, said the Cabinet Office.
The Government's decision to ban councils and other public bodies from divesting from trade or investments they regard as unethical is an attack on local democracy. People have the right to elect local representatives able to make decisions free of central government political control. That includes withdrawal of investments or procurement on ethical and human rights grounds.> This Government's ban would have outlawed council action against Apartheid South Africa. Ministers talk about devolution, but in practice they're imposing Conservative Party policies on elected local councils across the board. >