The German authorities plan to restrict rallies by far-right groups intent on undermining official World War II anniversary events this year.
A previous attempt to ban the NPD failed
A bill presented by Interior Minister Otto Schily on Friday would outlaw such rallies near Holocaust memorials, including former concentration camps.
He urged parliament to pass it before 8 May - the 60th anniversary of the end of World War II in Europe.
On Sunday Germany will mark the Allied air raid which destroyed Dresden.
Far-right activists are threatening to upstage the commemorations by holding a huge rally.
"Right-wing extremists must not be allowed to profit from any gaps in the law," said Justice Minister Brigitte Zypries at a joint news conference with Mr Schily.
The far-right National Democratic Party (NPD) has vowed to hold a big rally at Berlin's Brandenburg Gate on or around 8 May - near a new national memorial to victims of the Holocaust.
The NPD has had only marginal success in elections. But in September it won 9% of the vote in Saxony's elections, allowing it to enter a regional assembly for the first time since 1968.
Interior ministers from Germany's 16 states are meeting on Friday to consider imposing an outright ban on the NPD.
"I want my government to use every possibility to go down this road of a ban," Chancellor Gerhard Schroeder said in an interview on Thursday. "But it must have good chances of success."
But an attempt to ban the NPD failed in March 2003 when constitutional court judges ruled that evidence from secret service informers inside the party was inadmissible.
Last month NPD members caused outrage by storming out of the Saxony parliament during a commemoration for those killed by the Nazis at the Auschwitz death camp.