The decision was taken in the first Core Group meeting of the BJP after Rajnath Singh took over as party president on January 23.
"The Core Group observed that Mr Shinde's remarks have hurt Hindu sentiments. It condemned his comments that the BJP and RSS run terror training camps. The party has decided that its members and workers will boycott all public programmes in which Mr Shinde takes part," BJP General Secretary Ananth Kumar told reporters.
The BJP will also not respond to any communication or request for meetings from Mr Shinde to the party's senior parliamentarians, including NDA Working Chairperson LK Advani, and leader of the Opposition in the Lok Sabha, Sushma Swaraj.
Mr Shinde may find it difficult to get government business through during the forthcoming budget session of Parliament if the BJP does not respond to his calls for discussions on crucial issues.
However, the BJP president said his party does not intend to boycott Mr Shinde inside Parliament and will not disrupt proceedings when he rises to speak. "But we will raise this issue (Mr Shinde's remarks on Hindu terror) in Parliament," he said.
Significantly, this strategy of the BJP appears to be a slight climbdown, as the party had earlier insisted that Prime Minister Manmohan Singh and UPA Chairperson Sonia Gandhi should apologise for Mr Shinde's remarks and that he should be sacked from the post of home minister.
The home minister had alleged during the Congress Chintan Shivir in Jaipur last month that the BJP and RSS were involved in training their cadre in terror activities and those allegedly involved in Hindu terror acts were affiliated to them.