British tourists should avoid all but essential travel to Kenya's popular tourist destination of Lamu and the surrounding area, the Foreign Office said in an update to its travel advice.
More than 80 people have been killed in a series of attacks over the past four weeks that have terrorised the population on the mainland opposite the Lamu archipelago.
Al-Qaeda-linked militants al-Shabaab have claimed responsibility for the attacks, saying they were carried out as revenge against Kenya's military operations in Somalia.
Although hotels and houses catering to western tourists on the Lamu archipelago have not been targeted, Britain's latest travel warning against the Kenyan coast is likely to damage further the country's vital tourism industry.
The updated advisory - which stresses "a high threat of terrorism" - came just days after gunmen attacked another village in Lamu County, torching houses and stealing weapons, food and medical suppliers.
The Kenyan government condemned an earlier Foreign Office warning that Britons should avoid some Indian Ocean beach resorts and the port city of Mombasa, saying that "unfriendly" advisories played into the hands of terrorists.
"The challenges arising from acts of terrorism require concerted efforts to fight it and not behaving in a manner that accelerates it by causing fear and panic," Karanja Kibicho from Kenya's foreign ministry said in a statement.
Other countries including America, France and Australia have also issued advisories against travel to certain parts of Kenya.
Rising insecurity, that began with the Westgate mall attack in Nairobi last September followed by a series of smaller-scale bombings and grenade attacks linked to militant groups, has undermined visitor confidence.
The East African nation receives more visitors from Britain - close to 150,000 a year - than from any other country.
More than 600,000 Kenyans are directly employed in tourism. Many more survive indirectly thanks to the industry, which accounts for 12.5 per cent of the country's GDP.
Richard Branson, the Virgin Group founder, this week condemned Britain's travel advisories against Kenya in a blog post entitled "Why travel advisories hurt countries and help terrorists".
Mr Branson, whose company owns a lodge in Kenya's Masai Mara wildlife reserve and whose airline used to fly to Nairobi, described the advisories as "effectively a ban on travel, rather than leaving people to make up their own minds after being given all of the information".
He confirmed that his airline Virgin Atlantic "had to stop flying to Kenya" because of the "dwindling tourism industry".