The Belfast group has made headlines in recent months after it sharply criticised Israel and its military campaign against the Palestinian resistance group Hamas in Gaza.
Known for its confrontational style and Irish nationalist messaging, the band has denied supporting violence or banned groups.
But their anti-Israel comments on stage at the Glastonbury Festival in June drew global condemnation.
While Kneecap has denied any terrorism connection, singer Liam O’Hanna, known by his stage name Mo Chara, has been charged with a “terror” offence over alleged support for Hamas and Hezbollah in connection with a performance last year.
He is due to appear in a London court in August.
The rappers have been taken off the bill for festivals in Scotland and Germany this year because of the controversy.
However, they are scheduled to appear at France’s Rock en Seine on Aug 24.
“Hungary’s government has moved to ban @KneecapCEOL from entering the country and performing at @szigetofficial – citing antisemitic hate speech and open praise for Hamas and Hezbollah as justification,” government spokesman Zoltan Kovacs wrote on X.
“Granting them a stage normalizes hate and terror, and puts democratic values on the line,” Kovacs wrote, citing Hungary’s “duty to protect” its Jewish community.
The travel ban can be challenged within 30 days.
Kneecap was scheduled to perform on Aug 11 at the Sziget festival in Budapest, which ranks among Europe’s largest outdoor music bonanzas, drawing about 400,000 people each year.
Kneecap did not immediately respond to a request for comment by AFP.
Almost 300 Hungarian artistes, including Oscar-winning film director Laszlo Nemes, joined a petition protesting the trio’s planned Sziget performance.
Facing growing pressure, festival organiser Tamas Kadar said there was no “good answer” to the issue.
“We do not tolerate hate speech in any form – and that includes antisemitism,” but “we remain committed to the spirit of free expression” and “will not act as censors”, Kadar wrote in an op-ed published last week by a Hungarian newspaper.
Hungary is one of Israel’s closest allies in the European Union, with prime minister Viktor Orban directing police to ban pro-Palestinian rallies following Hamas attack against Israel on Oct 7, 2023.