Chancellor Angela Merkel unveiled on Thursday a package of measures aimed at combating terrorism and integrating refugees into the country with plans to create 100,000 jobs for asylum seekers.
Following a marathon overnight meeting, members of Merkel's Christian Democrats, her Christian Social Union sister party and the left-leaning Social Democrats approved a six-page paper that will form the basis for the integration law.
Merkel described the law, which is to be introduced into parliament on May 24, as historic.
"The core is trying to integrate as many people into the labour market," she said with the government targeting the creation of about 100,000 jobs for asylum seekers.
About 1 million refugees entered Germany last year, fleeing wars and poverty in the Middle East and Africa.
However, the chancellor's handling of the refugee crisis sparked tensions in her ruling coalition, contributing to a sharp swing against her party in three key state elections held last month.
The planned integration law, includes a list of sanctions for asylum seekers who refuse takes steps to integrate into German society.
Germany's 16 state premiers are to consider the proposed integration law at a meeting next week.
The terrorist action plan includes measures to boost the resources and funds for the nation's security forces as well as new restrictions on pre-paid mobile phone cards, which have in the past been used by terrorists in attacks in other parts of the world.
At their meeting, the leaders of Merkel's coalition also agreed to steps enabling Germany's intelligence services to exchange information with foreign secret security counterparts.
The move includes exchanging information with partner services in Europe, as well NATO member states and Israel.