Its lyrics call upon "soldiers of Allah" to "crush our enemies" and celebrates "martyrdom" as a glorious victory.
Ofcom launched an investigation after listeners complained that it "promoted terrorism" and contained "Jihadi lyrics".
It found: "We considered this Nasheed to be promoting a narrative closely associated with propaganda used by extremist organisations to recruit members.
"This Nasheed would have been understood by Arabic speaking listeners as being an implicit call to action to encourage people to join a form of violent Jihad.
"We consider the cumulative effect of lyrics and imagery was to condone, promote and actively encourage others to participate in violent acts as a form of devout religious expression and therefore amounted to an indirect call to action."
Ofcom said the radio station was in breach of broadcasting standards and is now considering statutory sanctions against it.
The sanctions include a correction to be aired or a financial penalty. They could even revoke its licence and shut it down for good.
The breakfast show's presenter said she did not speak Arabic and did not understand the chant before playing it.
Nor was it vetted, the Ofcom investigation found. She said she was "extremely sorry and horrified".
In a letter she added: "I sincerely apologise and feel quite embarrassed about the reputational damage to the station and myself this has caused."
The Pakistan Muslim Centre - which owns the radio station's licence - said it "wholeheartedly apologised for the error"
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