The government made the announcement after 25 people were killed in a fire at one such cafe in Beijing earlier in June.
China on the net
200,000 internet cafes - only 46,000 legally
registered
China now home to world's second largest community of web users
The state has its own secret internet police nicknamed "the great fire-wall of China"
The mayor of Beijing closed all the cafes in the city after the fire.
Critics have accused the authorities of using the blaze as an excuse to impose further controls on the use of the internet.
A statement from the Ministry of Culture said anybody running an unlicensed internet cafe from the beginning of July would be prosecuted.
Authorised businesses will also have to prove safety procedures are in place.
Internet cafes are massively popular in China, but there are already restrictions on which foreign websites can be accessed.
Spy software
A Hong Kong-based human rights group says Beijing also plans to order licensed net cafés to install software which can prevent access to up to 500,000 foreign websites.
The software would tell police when surfers try to access illicit pages, the Information Centre for Human Rights and Democracy said.
Such software has already been installed at prominent net cafes in major conurbations like Beijing, Guangzhou and Shanghai, the Centre says.
One programme, the Filter King, not only records attempted hits on banned sites, but is also said to send daily reports to local police net units.