China has some of the world's most polluted waterways
The five-year plan is estimated to cost about $84 billion - double the amount spent to control pollution in the past five years.
The plan envisages that by 2005 major pollutants such as sulphur dioxide must be cut by 10% from their 2000 levels.
The central government is to provide initial funding - about $8bn - to kick-start the programme, which will then be financed by local administrations as well as through taxes levied on polluting enterprises.
The BBC's Adam Brookes in Beijing says China has some of the world's most polluted cities and waterways - a result of Communist industrialisation followed by aggressive market reforms.
'Serious' situation
Our correspondent says the Chinese Government is aware that China's environment is in a wretched state.
Prime Minister Zhu Rongji has described the situation as "serious" and the outlook for the future as "not optimistic".
The new plan sets targets for pollution control, indices for evaluating the work and measures to ensure environmental protection measures are implemented.
The director of the State Environmental Protection Agency (SEPA), Xie Zhenhua, welcomed the government's new commitment to the environment.
"Never has the Chinese Government put the environment in such an important position. It is vital to the stability and prosperity of our country and people," said Mr Xie.
SEPA said it would pay special attention to the Three Gorges Dam area of the Yangtze River - where a controversial scheme is underway to build the world's largest hydroelectric station.
Global warming
Millions of metric tonnes of waste are dumped into the dam area every year and the situation is worse elsewhere in the country, according to the World Bank.
In a report last year, the bank singled out worsening land degradation, shrinking forests and deteriorating water quality. It also mentioned the problems associated with the increasing use of cars.
It urged the government to be more pro-active and not to be overwhelmed by economic growth. But our correspondent says not everything is bleak.
He says China gets high marks from international experts for what it has done to fight the perceived threat from global warming - emissions of greenhouse gases have dropped by about 15% since the mid-1990s at a time when the Chinese economy was growing very rapidly.