The university banned the mascot from performing at university athletic events several years ago in response to opposition from American-Indian groups who called the chief demeaning.
The dance sponsored by Students for Chief Illiniwek and the Honor the Chief alumni organization had been scheduled for Oct. 23 during homecoming weekend. University attorneys said the dance should be postponed while legal issues are resolved, the student newspaper The Daily Illini reported.
The event, called "The Next Dance" would have featured Ivan Dozier, a half-Cherokee senior, dancing barefoot and dressed in buckskins.
The cease-and-desist letter is in response to a number of trademark requests filed by the alumni group, the report said.
A letter from university lawyers cited objections to merchandise offers and Web site statements on the event. It said despite permission from the university and other interested parties, the school could face potential legal problems if "The Next Dance" occurs.
For more on the "Next Dance," see Protesting the "Next Dance" and Barnhill Speech at "Next Dance." For more on Chief Illiniwek, see Roger Ebert Loves Chief Illiniwek and Graham Crackers' Stereotypical Newsletter.