Ulster Defence Association (UDA) member Steven Moffat hired Kennoway's Lodge St Kenneth's to stage fundraising events.
Edinburgh High Court heard Moffat had previously been linked to Loyalist functions in the area where masked men – apparently armed with guns – were said to have been spotted. Kennoway's Lodge St Kenneth's was one of the venues.
But, speaking exclusively to the East Fife Mail, Provincial Grand Master David Wishart said he was "absolutely shocked" when he discovered the Levenmouth lodge could have been used as the venue for such sinister gatherings.
He explained: "As soon as police drew this to our attention I went up to the lodge and immediately closed the premises down, suspending all activities while we carried out an investigation to see how this could happen."
What he discovered was chilling.
The lodge had been hired in the name of UDA member Steven Moffat and had been used for meetings and social events such as dances for a local group which called itself the Kennoway Loyalists.
The Grand Master for the Fife and Kinross province was quick to distance the Freemasons from a member of the outlawed Protestant paramilitary terrorism group UDA.
Mr Wishart said: "This happened unbeknown to Masonic authorities. Senior members were absolutely horrified that this was going on.
"This man was not a Freemason nor did we find any of his people were," he emphasised.
In Edinburgh High Court last week, Moffat pleaded guilty to belonging to a group banned under the Terrorism Act and admitted possessing a handgun, ammunition and paramilitary paraphernalia.
Mr Wishart explained: "According to the police he (Moffat] had been active for at least 12 months. He drank in local pubs.
"He used the lodge for a Christmas dance and other set events. It wasn't on a regular basis."
Nevertheless, a full internal investigation swung into action to discover how such a group could be connected with the Masonic hall.
Afterwards, new members of the hall's management committee were put in place, Fife police checked revised procedures for leasing the lodge and, on April 11, Masonic activities at the Kennoway branch were given the go-ahead to resume.
Mr Wishart assured: "The lodge will be under close observation but I am quite happy that they have got this under control.
"It has damaged the lodge, but it is not irreversible damage. We have managed, so to speak, to clean it up. We will never allow this to happen again. We want to distance ourselves from it."
The Provincial Grand Master admitted the revelations had horrified him.
"I was absolutely shocked," he said. "When the police called me I was up there the next day and withdrew the lodge's Masonic charter."
Mr Wishart added: "I have been involved in the Masons for 40 years and have never known a lodge in this area to be shut down."