The new legislation is to "crack down hard" on prostitution as it encourages trafficking in women and sex slavery, Equal Opportunity Minister Mara Carfagna said.
The new law, which must still be adopted in parliament, does not ban prostitution altogether because it does not outlaw sex work as a private business.
Pimps responsible for under-aged prostitutes would face six to 12 years in prison and fines of between 15,000 and 150,000 euros (21,000 and 210,000 dollars).
Clients of under-aged sex workers can be sent to prison for between six months and four years with possible fines of up to 6,000 euros.
Sex workers under the age of 18 without Italian citizenship would meanwhile be sent back to their countries of origin.
An estimated 50,000 to 70,000 people, a third of them foreigners, are engaged in prostitution in Italy. Sixty-five percent are sex workers on public thoroughfares, and 20 percent are thought to be minors.