France's secretary of state for Sports Thierry Braillard announced the move on Thursday, a day before the kick off for the month-long Euro 2016 tournament.
Due to the threat from terrorism French authorities want to avoid people from massing in crowds outside bars and cafes so have barred venues from broadcasting the Euro 2016 matches live on outdoor giant screens.
"The security forces just don't have the means to keep them safe," he said of the country's countless terraces.
"A game shown on a terrace comes with a crowd around the screen," he told the BFMTV channel. "It's better to have a secure site that will allow thousands of people to gather in an organized fashion."
Braillard'swords were later clarified by government sports minister Patrick Kanner, who said the ban would only refer to giant screens being set up.
Each of the host city will have a highly secured fan zone where people are urged to go to watch matches.
Braillard said that people can still watch the games in closed-off areas, such as inside the bars, but that it would be "impossible" to allow the games to be shown on the terraces.
A senior police source said that bar terraces were "soft targets" and were of a particular concern for security forces.
"The number of targets is infinite," the police officer told L'Express newspaper.
"It could be any bar where people are watching a game. Protecting all of them would be impossible."
Bar and cafe terraces were one of the main targets during the November terror attacks in Paris, with terrorists opening fire on bar patrons at several locations across the city.
The gunmen killed 39 people and injured hundreds in the November attacks on the bars and bistros, out of the 130 victims in total.
France is set to see an enormous focus on security for the Euro 2016 tournament, which kicks off on Friday night.
Around 90,000 police and security guards will be on hand for the event, with security at the stadiums and fan zones set to be extremely tight.