Some members of the Shiv Sena said they were against "a Muslim actor going on stage in a Ramlila", a theatre festival based on the Hindu religious epic Ramayana and performed across India.
The actor had said performing in the Ramlila was "his childhood dream".
The Shiv Sena often resorts to violence and threats to push its agenda.
The dramatic folk re-enactment of Hindu god Ram's victory over the 10-headed demon king Ravana celebrates the triumph of good over evil.
Villages across India stage their own performances, and spend a long time rehearsing and preparing for the event.
Siddiqui, who was performing the Ramlila in his village Budhana in northern Uttar Pradesh state, was forced to cancel his appearance minutes before going on stage, after the Shiv Sena told organisers that they did not want him to act.
"In the 50-60 year history of the Budhana Ramlila, no Muslim artist has set foot on the stage. We couldn't allow that now. It's about tradition," Shiv Sena member Mukesh Sharma told The Times of India.
Siddiqui has said however, that he is confident of performing in the Ramlila next year.
The Shiv Sena party is a junior coalition partner in the western Maharashtra state government, which is ruled by India's governing BJP.
The party was founded in 1966 to keep south Indian migrants out of Maharashtra state and to halt the spread of Islam.
Over time, it has acquired a reputation for promoting religious and ethnic chauvinism while allegedly targeting minorities, especially Muslims.