The Legal Services Commission appropriated the property in Greenford, west London, despite Hamza claiming it did not belong to him.
It will now be sold in an attempt to pay off some of the £300,000 of taxpayers' money spent on his legal bills. Officials hope to raise £280,000 from the sale.
Hook-handed Hamza, 51, is in jail as he attempts to fight extradition to the U.S. on terror charges at the European Court of Human Rights.
He is also appealing against the Home Secretary's decision to strip him of his U.K. passport.
The Egyptian national was jailed for seven years in February 2007 for inciting murder and stirring up racial hatred.
The Egyptian national was jailed for seven years in February 2007 for inciting murder and stirring up racial hatred.
Carolyn Regan, chief executive of the Legal Services Commission, said: 'The LSC can confirm it has taken possession of Abu Hamza's property, as a contribution to recovering the legal aid costs spent on his defence.
'The LSC will not tolerate people trying to conceal their financial assets in an attempt to have their defence costs paid for by the taxpayer.
'Legal aid is a vital public resource and we are committed to ensuring it is spent on those who most need help with their legal problems and can least afford it.
'Since 2006, the LSC has recovered approximately £3million following Crown Court trials.'
The commission was granted a seizure order by the High Court after lawyers proved the property belonged to him.
The commission was granted a seizure order by the High Court after lawyers proved the property belonged to him.
Hamza secretly bought the four-bedroom semi as a buy-to-let investment for £220,000 cash while in prison in 2006.
His family, meanwhile, has been living in a £600,000 council house provided by the taxpayer while claiming benefits. One of their neighbours is Labour MP Ben Bradshaw, the Secretary of State for Culture Media and Sport.
Former Cabinet Minister John Hutton lived next door to the cleric's family before putting his property on the market for £1million in June 2007.
Hamza bought his investment property while a Treasury order was supposed to freeze his assets and prevent him from buying or selling houses.
But he is thought to have easily sidestepped the anti-terrorism sanction by registering the house under a relative's name.
For years the firebrand cleric has ranted against the evils of capitalism, but has proved himself to be a shrewd wheeler-dealer in the property market.
For years the firebrand cleric has ranted against the evils of capitalism, but has proved himself to be a shrewd wheeler-dealer in the property market.
He used the right-to-buy scheme to get a council flat in Hammersmith, West London for £100,000 in 1999 and sold it in September 2004 for £228,000.
Just weeks later he paid £220,000 for the 1930s semi in Greenford, which has since risen in value to £280,000.
At the time, he was on remand in Belmarsh prison in East London awaiting trial. He claimed he could not afford to pay for his defence and was granted legal aid. In 2006, the house was being rented out for £270 per week - £1,170 per month - and was occupied by Polish labourers
TaxPayers' Alliance chief executive Matthew Elliott hailed the LSC seizure.
He said: 'It is great news that at long last taxpayers are starting to get some money back from Abu Hamza.'
He said: 'It is great news that at long last taxpayers are starting to get some money back from Abu Hamza.'
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