Critics have come down hard on the proposal, which would compel telephone and broadband providers to retain electronic data for six months, the shortest possible time in accordance with EU directives.
Justice Minister Beatrice Ask explained that the bill is concerned about privacy when she presented the legislative proposal on Thursday.
"The proposal means that the information can only be disclosed for crime-fighting purposes," Ask said a news conference.
The directive would force member states to legislate the storage of telephone calls, text messages, email and other internet traffic. The aim is to prevent and solve crimes.
Both organisations for civil rights and telephone operators have pointed out the problems with keeping an eye on individual human communication.
The goal of data storage was to acquire new weapons in the fight against terrorism, but over time, the emphasis has fallen more on serious crime on the whole.
In October, a leaked draft of recommendations on the proposed law emerged. It proposed that police and prosecutors could request information from broadband operators for IP addresses even for crimes that do not require jail time.
If it became reality, it would mean that an estimated 1 million people engaged in file sharing would no longer feel safe.
"East German society is inching closer," said Jon Karlung, chairman of broadband provider Bahnhof.
Sweden was convicted in the EU Court of Justice for not having implemented the directive in February.
The EU adopted the Data Retention Directive in March 2006. The terror attacks in Madrid in 2004 became a lever for EU governments to enforce the requirement.
The laws would force telephone and internet service providers (ISPs) to store large amounts of data for at least six months and up to two years. The data would be available if the police needed them to solve crimes.
The directive has led to violent debate at times across the EU. Many countries believe the act violates free speech.