The move comes six months after Mohamed Merah, a French citizen who claimed to have attended Al-Qaeda-style training camps in Pakistan and Afghanistan, killed seven people in a wave of shootings in and around Toulouse.
The plans were presented to cabinet on Wednesday and President Francois Hollande hopes parliament will adopt them by the end of the year, government spokeswoman Najat Vallaud-Belkacem said.
"The terrorist threat remains at a very high level in France," she said.
The reforms will allow authorities to detect "the spread of radicalism or jihadism on the Internet and to identify people returning to France after training or participating in terrorist actions" abroad.
The bill would amend France's criminal code to make terrorism-related crimes committed outside France punishable in the country.
Those attending training camps abroad could face up to 10 years in prison for "association with a terrorist enterprise".
The changes would also allow authorities to monitor the telecommunications data of the creators of extremist websites.
French authorities have been criticised for failing to prevent Merah's attacks despite his links with foreign Islamists, which were known to intelligence services.
Merah shot dead three Jewish schoolchildren, a rabbi and three paratroopers before being killed himself on March 22nd following a 32-hour police siege of his flat in the southern city of Toulouse.