Government figures suggest that while more than half of daily trips are less than three kilometres, only three percent of these are made on a bicycle. The new strategy aims to increase this to 12 percent by 2020.
Calculations by the transport ministry estimate that greater bike use would have beneficial environmental effects.
"If every European cycled 2.6 kilometres a day, CO2 emissions from transport would be cut by 15 percent," said the ministry.
The government has also estimated that the health benefits of bike use already save the country €5.6 billion in health costs. A statement said savings could be as much as €10 billion if 10 to 12 percent of short trips were made on bikes.
Proposals will include increasing the number of secure places for people to lock up bikes and helping to boost cycle tourism. The government is also keen to get employers to reimburse workers who come to work on a bicycle.
A poll by radio station Europe 1 on its website suggested people were fairly evenly split on whether payments would encourage them to cycle to work.
Of around 7,000 who took part, 41 percent said the incentive would encourage them into the saddle, while 48 percent said it wouldn't.
France already has a number of rental bicycle schemes in operation in cities across the country, including the popular Vélib scheme launched in Paris in 2007.