The National Council of Canadian Muslims is filing a statement of claim in Ontario Superior Court after failing to get an apology from the Prime Minister's Office for the January remark.
Lawyer Jeff Saikaley says the council is seeking a public retraction and damages of up to $100,000.
The comment in question came after the council criticized the inclusion of controversial rabbi Daniel Korobkin in a delegation accompanying Harper to the Middle East.
In January the council took its first legal step by filing a notice of libel which quotes Harper spokesman Jason MacDonald as saying, "We will not take seriously criticism from an organization with documented ties to a terrorist organization such as Hamas.''
The comment was “categorically false, offensive and defamatory,” Ihsaan Gardee, the council’s executive director, said at the time.
Discussions between the parties have not resolved the matter.
"We did have conversations with the lawyer representing Stephen Harper and Jason MacDonald, and we weren't able to reach a satisfactory agreement. So we have no choice but to proceed to the next step," Saikaley said.
"We're still hopeful that something can be done to avoid an actual trial, but for the time being this is what's been required to protect our client's interests."
The council describes itself as an independent, non-partisan, non-profit group that has worked for 14 years on human rights and civil liberties issues on behalf of Canadian Muslims.
A half-dozen other rights groups, including the Canadian Civil Liberties Association and the Canadian Association of University Teachers, have offered support to the Muslim group.
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