Berlin has seen an increase in suspected spying cases linked to Russia since the Ukraine war, and also to China with ties to Beijing under growing pressure.
A draft law will expand review measures for staff in sensitive fields, such as IT and communications, in government and in "critical infrastructure" like railway control centres, the interior ministry said.
Intelligence services will also be involved in conducting the checks.
"The threat to our democracy from espionage and sabotage has reached a new dimension," said Interior Minister Nancy Faeser.
"Russian aggression in Europe has fundamentally changed the security situation... Germany is in the sights of intelligence services from other states."
Extra online checks are among the new measures, including on social media platforms that can be used for "disseminating extremist content", the ministry said.
"We will not allow extremists to sabotage our democratic constitutional state from within," said Faeser.
The cabinet approved the bill Wednesday, and parliament must now pass it before the new measures become law.
Germany has been shaken by several cases of alleged spying for Russia since the invasion of Ukraine in 2022.
This includes the case of a former German intelligence officer accused of handing information to Moscow that showed Germany had access to details of Russian mercenary operations in Ukraine.
There have also been growing concerns about Chinese espionage. In the most high-profile case, an aide to a German far-right member of the European Parliament was arrested in April on suspicion of spying for China.
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