Use of these mushrooms can 'lead to unpredictable behaviour and risk-taking', the ministry said in a statement.
"The sale and possession of dried (hallucinogenic) mushrooms has been forbidden for a long time," the ministry said, adding that the ban would now be extended to fresh magic mushrooms.
The death in March last year of a 17-year-old French girl who jumped from an Amsterdam bridge after taking hallucinogenic mushrooms had triggered a controversy in the country over the risks of such drugs.
No link was officially made between her death and the mushrooms but a majority in parliament called for a total ban on the drug.
A report by Amsterdam health authorities issued in May said that 92 percent of incidents relating to magic mushrooms in the Dutch capital last year were due to foreign tourists.
But another health report published in January 2007 said that while alcohol consumption led to 2,050 incidents in 2005, magic mushrooms had caused only 70.
A total ban on all magic mushrooms should lead to the closure of so-called 'smartshops' that sell them. They have already announced that they will fight the decision in court.