Home Secretary Jacqui Smith wants to criminalise paying for sex "controlled for another person's gain" in England and Wales after rejecting a total ban on prostitution because of insufficient public support.
Under current laws, buying or selling sex is not illegal but other activities related to prostitution are, such as soliciting, kerb-crawling and pimping.
"It is my proposal that men should actually think twice about paying for sex. The reason they should do that is that actually the majority of women don't want to be involved in prostitution," Smith told BBC radio.
"Trafficked women don't have a choice, men do... If there was not a demand for sex with trafficked women, there would be less trafficking."
Under the proposed changes, a man who pays for sex with a prostitute who has been trafficked or is being pimped will get a criminal record and could be liable for a fine of up to 1,000 pounds.
Not knowing that the prostitute had been trafficked or was being pimped will not be a defence in court.
Britain's laws on paying for sex have been in the spotlight since the murder of five prostitutes by a serial killer in Ipswich in 2006.
In recent years, the government has proposed a series of measures including relaxing the law by allowing groups of women to work together in brothels and introducing prostitution tolerance zones, later ditched.
Research from Exeter University says there are around 80,000 prostitutes in Britain, of whom 20,000 have come from abroad.
Smith's plan, which shifts the focus on to punishing people who pay for sex rather than accommodating sex workers, is strongly opposed by the English Collective of Prostitutes (ECP), which represents people in the trade and wants the laws loosened.
"Workers don't benefit from criminalisation - the ECP has been inundated by women who have been raided, arrested and charged and face imprisonment for running safe, discrete premises where no coercion is taking place," the ECP said.
"Anti-trafficking legislation is being used to justify these raids... how can women who want to get out of prostitution find another job if they have a criminal record?" added a statement on its website.
A leading academic in the field has also spoken out against the proposal, accusing the government of "posture politics".
Belinda Brooks-Gordon, a reader in psychology and social policy at Birkbeck College, University of London, told AFP that a "tiny, tiny proportion" of people working in the British sex industry were trafficked.
"Nobody doubts that they are very vulnerable people in need of great help but this kind of sexual McCarthyism doesn't help those people," she said. "This will in effect be an all-out ban but it's a dishonest all-out ban."
And a spokesman for the sex workers' branch of the GMB union added: "These proposals will at best be ineffective and at worst increase the danger and criminalisation that sex workers face."
The government is likely to include the proposed legislation in the Queen's Speech - the programme for the next session of parliament - on December 3.