The city court of Tashkent, the capital of the Central Asian state, upheld in its ruling the Justice Ministry's request to close the economic and social policy research NGO, whose activities it said did not correspond to the objectives stipulated in its charter.
The organization can appeal the ruling within 20 days.
The ministry said it had conducted a check at Urban Institute's office in January 2006, which revealed violations in the NGO's work.
"However, the violations have not been removed completely," Erkin Abdullayev, a Justice Ministry official, said.
Tashkent has stepped up pressure on international organizations operating on its territory, accusing them of backing the opposition and attempting to discredit the country following unrests in the southeastern city of Andijan.
Official reports said clashes with police in Andijan in May 2005 claimed the lives of 187 people, but independent figures put the death toll several times higher.
Over the past six months, Uzbek authorities have expelled the Eurasia Foundation, Freedom House, the International Research and Exchanges Board, the American Bar Association, Counterpart International, and Radio Free Europe/Radio Liberty, according to IRIN, an independent news service within the UN Office for the Coordination of Humanitarian Affairs.
The latest closure took place June 1, when a Tashkent court ordered the liquidation of the American Council for Collaboration in Education and Language Study (ACCELS) for repeated law violations.