Critics say plantations are pushing further into the rainforest
The Brazilian government has unveiled plans to ban sugar cane plantations in environmentally sensitive areas.
The proposal, which must be passed by Congress, comes amid concerns that Brazil's developing biofuels industry is increasing Amazon deforestation.
Environment Minister Carlos Minc said the measures would mean ethanol made from sugar cane would be "100% green".
The government agenda is becoming more environmentally friendly ahead of the 2010 presidential poll, analysts say.
The plans unveiled by Mr Minc would limit sugar cane plantations to 7.5% of Brazilian territory or 64m hectares, and prevent the clearing of new land for the crop.
Brazil has a well-developed programme of ethanol fuel
The proposed legislation, expected to be put to Congress next year, would also prohibit the building of ethanol distillation plants in food-growing areas or in the vast wetlands of the Pantanal, on Brazil's border with Bolivia.
Brazil, the world's top producer of sugar, has long championed ethanol as an environmentally friendly source of energy but concerns have grown over its potential hazards.
Critics have said that the spread of sugar cane plantations into areas like the Amazon and the Pantanal has increased deforestation.
"This legislation is extremely welcome because it sends a clear signal to farmers and to the world that the government wants to exercise control," Paulo Moutinho from environmental group Imazon told the AFP news agency.
The debate over the environmental credentials of ethanol has become increasingly sensitive in Brazil, raising tensions among ministers, says the BBC's Gary Duffy in Sao Paulo.
But our correspondent says that as next year's presidential election approaches, the government of President Luiz Inacio Lula da Silva has been stressing its green credentials with renewed vigour.
President Lula, who enjoys high approval ratings, cannot stand for a third term but is keen to see his chief of staff Dilma Rousseff succeed him.
Complicating the electoral scene, however, is the likely candidacy for the Green Party of Marina Silva, the former environment minister, who left the president's Workers Party (PT) earlier this year.
Ms Silva, a stanch defender of the Amazon rainforest, is highly unlikely to win but with her green background she could help to splinter the PT base and take some votes from Ms Rousseff.