Denmark is withholding 65m krone (£7.5m; $9.8m) in aid to Tanzania after "unacceptable homophobic comments" from a senior politician, a minister says.
Development Minister Ulla Tornaes did not name the official but said she was "very concerned" by the comments.
Last month, Paul Makonda, commissioner for the commercial capital Dar es Salaam, called on the public to report suspected gay men to the police.
He said he would set up a surveillance squad to track down gay people.
The government said at the time that Mr Makonda was expressing his personal opinion, not government policy.
Homosexual acts are illegal in Tanzania and punishable by up to 30 years in prison. Correspondents say statements against gay people have increased since President John Magufuli's election in 2015.
In 2017, the country's deputy health minister defended a threat to publish a list of gay people.
"I am very concerned about the negative development in Tanzania. Most recently the totally unacceptable homophobic statements from a commissioner," Ms Tornaes said on Twitter.
"I have therefore decided to withhold DKK 65m in the country. Respect for human rights is crucial for Denmark."
Denmark is one of Tanzania's biggest aid donors.
Ms Tornaes has also postponed a planned trip to the east African country, Danish broadcaster DR reported.
The Tanzanian government has not yet commented.
Mr Makonda - a staunch ally of the president - said last month that he expected international criticism for his stance, but added: "I prefer to anger those countries than to anger God."
The government distanced itself from his views, saying that he "was only airing his personal opinion".
It said the government would "continue to respect and uphold all human rights as provided for in the country's constitution".
Earlier this month, 10 men were arrested for allegedly conducting a same-sex marriage ceremony on the Tanzanian island of Zanzibar.
The move was condemned by human rights groups.
In a statement on EU-Tanzania relations, the European Council said it would "conduct a comprehensive review of its policies" towards the country.
Citing an "unprecedented attitude", the council renewed calls for "Tanzanian authorities to refrain from exerting undue pressure and limitations on diplomatic missions".
High Representative Federica Mogherini said there were deep concerns about "the deteriorating situation for LGBTI persons".