The ban, which began in July 2025, made membership of, or support for, the direct-action group a criminal offence punishable by up to 14 years in prison.
The 35-year-old previously said she would donate earnings from her books and BBC adaptations of novels to Palestine Action, which has a stated goal of "ending global participation in Israel's genocidal and apartheid regime".
As a result, Rooney's publisher Faber has determined it cannot sell her novels in Britain.
In a statement, Rooney acknowledged when the group had been proscribed as a terrorist organisation in the UK.
"The following month, I wrote an opinion piece expressing my intention to go on supporting Palestine Action, which is not a proscribed or otherwise prohibited group here in the Republic of Ireland," she said.
"The fulfilment of contracts to publish my work in the UK could now constitute a serious criminal offence.
"After a process of consultation and deliberation, and with my full agreement, my publisher Faber has therefore determined that it can no longer supply my work within the UK.
"I have made every effort to be honest with the public about my beliefs and intentions, and I am wholly prepared to accept the consequences."
Faber has been contacted for comment.
Palestine Action co-founder Huda Ammori said the development was "a new low in the escalating assault on free speech" caused by the proscription of the group.
"A world-renowned author fearing arrest and being forced to remove her books from our bookstores exposes the chilling consequences of this authoritarian law," she said.
"Sally Rooney took a brave and principled stand ... She has refused to compromise her convictions, even at considerable personal and professional cost."
A Home Office spokesperson said the proscription followed a rigorous and evidence-based process, endorsed by Parliament.
"The Court of Appeal found that Palestine Action carried out acts of terrorism, celebrated those who took part in them and promoted the use of violence," they said.
"The proscription of Palestine Action does not affect lawful protest in support of the Palestinian cause, which remains a fundamental democratic right."
Supporters of the group have staged regular protests in defiance of the ban, leading to hundreds of arrests under terrorist legislation.
Rooney is the author of the bestselling novels Conversations With Friends, Normal People, Beautiful World, Where Are You? and Intermezzo.
In September 2025, she cancelled a trip to London to accept the Sky Arts Award for literature over concerns she could be arrested if she entered the country over her support for the group.
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