Ministers are planning to tighten the law to make it an offence to possess computer-generated or cartoon images depicting child sex abuse.
It is currently an offence to possess indecent photographs and pseudo-photographs of children.
But there has been a growth in computer-generated images, cartoons, and drawings, which are not illegal.
Home Secretary John Reid said the government was "determined" to protect children from abuse.
Concern
On Monday the government launched a consultation on tightening the law.
Ministers want to create a new offence with a penalty of three years in prison and an unlimited fine.
This would make it a lesser offence than possessing actual photographs of child sexual abuse.
A Home Office spokesman said police and children's organisations were reporting that the availability of computer-generated and cartoon abuse images was growing.
"Rapid technological advancements in the past decade have brought many benefits, but also threats"
Photographs of real children being abused are being manipulated into a format that is legal to possess.
There is concern the explicit images, which sometimes depict cartoon-like characters, could be used by offenders to "groom" children for abuse.
The images are often found alongside illegal photographs but police cannot currently confiscate them and bring about a prosecution.
Action 'critical'
Mr Reid said: "Sexual crimes against children are vile and devastating for the victims.
"Rapid technological advancements in the past decade have brought many benefits, but also threats.
"The ease with which images can be circulated or altered brings fresh challenges in combating the availability of child sex abuse images.
"It's critical that the law stays one step ahead and nowhere is this more important than protecting children from harm."
The consultation will consider whether to amend the Protection of Children Act 1978, create a new stand alone offence, or do nothing.
Ministers stressed they did not intend to ban "genuine works of art".
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