The move follows last week's deadly invasion of the Capitol by supporters of President Donald Trump.
Shares of the San Francisco company at last check rose 6.2% to $170.69.
"Guests whose reservations are canceled will be refunded in full. We also will reimburse hosts, at Airbnb’s expense, the money they would have earned from these canceled reservations," the company said in a blog post.
"We are continuing our work to ensure hate-group members are not part of the Airbnb community," the company added.
President-elect Joe Biden and Vice President-elect Kamala Harris will commence their four-year term on Inauguration Day, Jan. 20, in the nation's capital.
Reservations made on Airbnb affiliate HotelTonight will also be canceled.
Last Wednesday, while electoral votes were being counted, a mob of Trump supporters, encouraged by the president, forced their way into the iconic building, resulting in the deaths of a Capitol Police officer and four others.
Airbnb said it had "identified numerous individuals who are either associated with known hate groups or otherwise involved in the criminal activity at the [Capitol] and they have been banned from Airbnb’s platform."
Collective efforts like the #DontRentDC campaign on social media have also started to encourage local short-term rental hosts to delist their properties over inauguration week.
Some Airbnb hosts have devised creative ways to keep potential insurrectionists out of their homes, while activists are promoting the idea of making short-term rentals unavailable all week, the Washington Post reported.