The mosque was planned to be built with funding from Bahrain’s Al Khalifa regime, according to Bahrain al-Yawm.
Local sources said the main reason behind denying permission was the source of the money that was going to be spent in the project.
Finnish media said the political situation in Bahrain and the continued crackdown on the people in the Arab country, which has drawn criticism from human rights organizations, played a part in the decision by Finland.
The planned mosque would accommodate 2100 worshippers and include health and sports facilities.
Bahrain has been the scene of anti-regime protests on an almost daily basis ever since a popular uprising began in the country in February 2011.
People have been demanding that the Al Khalifa dynasty relinquish power and let a just system representing all Bahrainis be established.
Scores of people have been killed and hundreds of others wounded or detained amid Manama’s crackdown on dissent and widespread discrimination against Bahrain’s Shia majority.