(CNN) -- Twitter will withhold content from a neo-Nazi account at the request of German authorities, the first time it has put into action a policy of local censorship it adopted in January and a step that will probably reignite debate over freedom of expression on the Internet.
Alex Macgillivray, Twitter's general counsel, tweeted the company's decision Thursday: "We announced the ability to withhold content back in Jan. We're using it now for the first time re: a group deemed illegal in Germany."
But although Twitter, hailed by many as a powerful enabler of free speech, is taking its first step toward limiting hate speech, some groups say it still has a long way to go.
The Anti-Defamation League has said it "lags far behind" other social media networks in setting clear standards over racism.
A barrage of anti-Semitic abuse prompted by a series of hashtags in France has highlighted the problem there in recent weeks, with the French Union of Jewish Students adding its voice to the concerns raised by the ADL.
"When free expression crosses the line into speech that society recognizes as an affront to individuals' human dignity and as thinly veiled calls for violence, then the service provider has a responsibility to establish acceptable boundaries," ADL national director Abraham Foxman said.
"It is time for Twitter to set some boundaries."
Incitement against people, particularly for racial reasons, and advocating the overthrow of democracy became illegal in Germany after the fall of the Nazi dictatorship. Authorities there strictly enforce anti-propaganda measures handed down against hate groups.
The neo-Nazi club Better Hannover used its website for racist and anti-democratic propaganda. The site has disappeared from the Internet, but the group's Twitter feed is still visible in the United States.
In its role of enforcing the ban on the group, police in Hannover, Germany, sent a fax in late September to Twitter's headquarters in San Francisco announcing that the group's "accounts in social networks have to be closed immediately."
Twitter's response falls short of the German demand.
In another tweet, Macgillivray indicated that Twitter would selectively deal with the feed: "Never want to withhold content; good to have tools to do it narrowly and transparently."
The tweet includes a link to a support page explaining how Twitter can withhold content from view in specific countries.
Police who carried out raids on Better Hannover confiscated computers, far-right paraphernalia and weapons, the Interior Ministry for Lower Saxony state said in a statement on September 25.
The group, which had been known about since 2008, was "dissolved with immediate effect. Any activity or the building of a substitute group is not allowed," it said.
The extremist group's Twitter feed includes links to another far-right group's website. It stops abruptly on September 25, the day of the police raids.
Lower Saxony Interior Minister Uwe Schuenemann told CNN by e-mail Thursday that he welcomed the swift reaction by Twitter and other Internet companies.
"This is a very important step. For far-right extremists especially, the Internet has become more important as a communications and recruiting platform. There is only one goal during the fight against far-right extremism, and that is to undermine and stop the spreading of this inhuman ideology."
Dirk Hensen, a spokesman for Twitter Germany, stressed the company's transparency over its action.
Kirsty Hughes, chief executive of Index on Censorship, a London-based group that promotes free expression, said that what is key is who is making the decision about censoring content.
Twitter's action came in response to a request from Germany based on its laws barring hate speech, rather than being driven by the company itself, she points out.
Where Twitter and other websites face a difficult balancing act is where countries' laws overstep the boundaries of free expression, she said.
"Different countries have different laws about hate speech. We, as a freedom-of-expression group, would say 'put restrictions on speech where there is a clear and direct incitement to violence.' Otherwise, we would always argue for fairly limited controls," she said.
Twitter's move will probably feed into a wider debate in the digital world about the "privatization of censorship," Hughes said.
"There's a big issue about what do we want Web hosting companies and Internet service providers to do," she said. "We don't ask telephone companies to censor what you, or I or anyone else is saying on the phone.
"If we were to ask or even pass regulation saying all these Web hosting services had to vet and moderate everything on their site, when there are billions of things on the site, it would completely close down the ability of the Internet to operate as it does, as a wonderful place for free expression and swapping of ideas."
On the other hand, if companies such as Twitter respond instead to government requests or court orders over specific content, "that's a way of managing it without putting a complete chill on the whole Internet."
As an example of the challenges Internet companies face, Hughes points to Google's recent troubles in Brazil, where the company's top executive was arrested for not taking down online videos that government officials said violated the South American country's election law.
CNN's Stephanie Halasz and Saskya Vandoorne contributed to this report.