The declaration made it possible for Ottawa to block fundraising in Canada for the Liberation Tigers of Tamil Eelam (LTTE), or Tamil Tigers, a group fighting for the autonomy of northeastern Sri Lanka.
"The decision to list the LTTE is long overdue," Day said in a statement.
"Our government is clearly determined to take decisive steps to ensure the safety of Canadians against terrorism."
But Foreign Minister Peter MacKay said Canada will continue to try to act as peace broker in the three-decade-old conflict which has claimed more than 60,000 lives.
MacKay urged the Sri Lankan government to "fulfill its pledge to bring a negotiated resolution to the conflict" and blasted the LTTE for its continued use of violence to press its cause.
Officially labelling the Tamil Tigers a terror group means that fundraising activities on their behalf are now outlawed here.
According to a Human Rights Watch study released last month, the group extorts money from Sri Lankan Tamil immigrants in Britai