Computer-generated child abuse images should be banned and a new "kite mark" standard introduced for software to protect children from paedophiles.
Mr Reid said society had to protect children
The Home Secretary, John Reid, said the Cabinet was discussing how to ban the images, including cartoons and graphic illustrations of abuse.
While distributing such images is illegal, it is legal to possess them.
He also said that by spring, approved parental control software would come with a British Standards' Kitemark.
Mr Reid told the Task Force on Child Protection on the Internet there was "no higher purpose" for government, "than to protect children".
"Computer-generated images of child abuse are often found by police stored alongside illegal material held by paedophiles," he said.
"Yet, at the moment, while it is illegal to distribute these abhorrent images, it is entirely legal to possess them."
John Carr of children's charity NCH said the images were becoming more prevalent: "The fact that they are legal sends out totally the wrong message to child abusers.
"Banning their possession is the only sensible way forward."
Mr Reid also said the task force had developed an industry standard for software to help parents protect their children from internet paedophiles.
The "kite mark" would be given to programs meeting minimum standards, to give parents confidence that the product chosen is effective and simple to use.
A training pack for prison, probation and social workers on the dangers of the internet and how to spot warning signs, has also been developed.
Jim Gamble, of the Child Exploitation and Online Protection centre, said the move would close "legislative loopholes", better inform the public, and allow experience to be shared between professionals.