In a statement, the Saudi embassy in London said the claims were "categorically false".
Foreign funding for Islamist extremism in Britain mostly originates from Saudi Arabia, a think-tank report said on Wednesday in claims that were branded as "categorically false" by the Saudi embassy.
"While entities from across the Gulf and Iran have been guilty of advancing extremism, those in Saudi Arabia are undoubtedly at the top of the list," Tom Wilson, a fellow at the Henry Jackson Society, said in a statement.
According to the hawkish London-based foreign policy think-tank, Saudi Arabia has since the 1960s "sponsored a multi-million dollar effort to export Wahhabi Islam across the Islamic world, including Muslim communities in the West".
The ultra-conservative kingdom is the cradle of the austere Sunni doctrine of Wahhabism and is home to Islam's holiest site in Mecca.
Funding from Saudi Arabia has primarily taken the form of endowments to mosques, the report said, which have in turn "played host to extremist preachers and the distribution of extremist literature".
The report also flagged that some of Britain's most serious Islamist hate preachers have "studied in Saudi Arabia as part of scholarship programmes".
In a statement to the BBC, the Saudi embassy in London said the claims were "categorically false".
"We do not and will not condone the actions or ideology of violent extremism and we will not rest until these deviants and their organisations are destroyed," it added.
The Henry Jackson Society called for the creation of new laws requiring mosques and other Islamic institutions to declare foreign funding.
It also demanded the launch of a public inquiry into foreign funding of extremism, putting pressure on the government which has so far refused to publish its own report into foreign funding of terrorism.