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The Henry Jackson Society said a clear and growing link can be drawn between overseas money, which mainly comes from Saudi Arabia, and the recent wave of attacks in the UK and Europe.
The think-tank has called for a public inquiry into the issue.
Report author Tom Wilson said: "While entities from across the Gulf and Iran have been guilty of advancing extremism, those in Saudi Arabia are undoubtedly at the top of the list.
"Research indicates that some Saudi individuals and foundations have been apparently heavily involved in exporting an illiberal, bigoted Wahhabi ideology."
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It found there have been "numerous" cases of Britons who have joined jihadist groups in Iraq and Syria whose radicalisation is thought to be linked to foreign-funded institutions and preachers.
The Henry Jackson Society said foreign funding for British extremism comes mainly from governments and state-backed foundations in the Gulf, along with Iran.
Mr Wilson added: "There is a clear and growing link between foreign funding of Islamist extremism and the violent terrorism we have witnessed across the UK and Europe.
"The key now is to get ahead of the issue and find out the full extent of what has been going on. A public inquiry would go some way to informing the debate."
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An inquiry was ordered by her predecessor David Cameron in 2015, but reports have suggested the findings may never be published because of the sensitivity of the information regarding Saudi Arabia.
Labour MP Dan Jarvis said the report "sheds light on what are extremely worrying links between Saudi Arabia and the funding of extremism here in the UK".
"In the wake of the terrible and tragic terrorist attacks we've seen this year, it is vital that we use every tool at our disposal to protect our communities," he said.
"This includes identifying the networks that promote and support extremism and shutting down the financial networks that fund it.
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A Government spokesman said: "Defeating the evil ideology of Islamist extremism is one of the greatest challenges of our time.
"The Commission for Counter-Extremism, which the PM announced earlier this year, will have a key role to play in this fight.
"We are determined to cut off the funding which fuels the evils of extremism and terrorism, and will work closely with international partners to tackle this shared global threat, including at the upcoming G20 summit."
Sky News has attempted to contact Saudi Arabia's UK embassy for comment.