Hardline Buddhist nationalists stopped a Muslim religious ceremony in Yangon on Sunday, witnesses and organisers said, as Islamophobic tensions boil over amid a bloody military campaign against Rohingya in northern Rakhine state.

Dozens of people, led by a handful of maroon-robed monks, marched to the YMCA in Myanmar's commercial capital to shut down a service marking the Prophet Mohammed's birthday.

"We have celebrated this festival for my whole life. Now this seems like an attack on freedom of religion," Kyaw Nyein, secretary of the Ulama Islam organisation, told AFP.

"The monks tried to stop the ceremony without saying what we had done wrong... Why aren't authorities taking action?"

Witnesses, who asked not to be named, said the monks barged into the ceremony shortly after it started demanding it be shut down.

Police were called, but did not intervene to stop the hardliners.

Tin Maung Win, vice president of the festival organising committee, said Buddhist nationalists were trying to stir up political dissent against the NLD government led by Aung San Suu Kyi.

He said the religious extremists supported the military-backed USDP party and see the new elected government, which took power last year after winning the first free election in some 50 years, as being too soft on Muslims.

"We held the festival here for seven years without any violence, but today it happened. This is because of political interests," he told AFP.

Long-simmering lslamophobic sentiment has been on the rise in Myanmar since deadly communal violence erupted between Buddhists and Rohingya Muslims in western Rakhine state in 2012.

In recent years Buddhist hardliners have sought to restrict Muslim worship, destroying mosques and trying to ban ceremonies such as the ritual slaughter of cattle during the festival of Eid al-Adha.

Tensions have boiled over since attacks on police posts along the Bangladesh border in October, which the government has blamed on Rohingya insurgents led by foreign fighters and backed by Middle Eastern money.

Until the recent fighting, the Rohingya had generally eschewed political violence despite decades of persecution.

Dozens have died in the ensuing military crackdown, sending some 50,000 Rohingya fleeing to Bangladesh telling stories of rape, murder and arson at the hands of Myanmar security forces that activists say could amount to crimes against humanity.