In a statement announcing the ban, the home ministry said the Bengali novel "contains anti-Islamic sentiments and statements that could destroy the religious harmony in Bangladesh".
The book, Utal Hawa [Strong Breeze], published from Kolkata was likely to disturb the socio-economic harmony of the country, it said.
Authorities said all copies of the book, which is actually the second volume of Nasreen's earlier novel Amar Meya Bela [My Days As A Girl], have been seized.
Nasreen, a physician-turn-writer, rose to prominence after the publication of her first novel Lajja [Shame] in 1993, which was immediately banned in Bangladesh for allegedly hurting the religious sentiments of Muslims and other communities.
She fled Bangladesh after some radicals threatened to kill her in 1994 and has since lived in self-imposed exile in Sweden and France.
Recently, she travelled to India and is reported to be living in Calcutta.
In April last year, her novel Forashi Premik [French Lover] was published in Dhaka. The novel, her first published work since she left Bangladesh, concerned a Bengali woman who leaves her husband and moves to Paris.
The author would face trial on charges of blasphemy and if convicted, could be jailed for up to two years.
I shall never be silent: Taslima Nasreen
Taslima Nasreen to seek asylum in India
Bangla fanatics hound Nasreen into hiding
Bangladesh issues fresh warrant for Taslima's arrest
Islamic radicals refuse to pardon Taslima
Taslima likely to seek bail
Tell us what you think of this report