"People with radicalised beliefs pose a real threat to our security," Justice Minister Soren Pind said in a statement.
"It is totally unacceptable that prisoners recruit their fellow inmates to extremist environments while they are serving a sentence."
The minority right-wing government plans to put two related bills on the subject before parliament in December.
One would allow prisons to separate inmates with extremist views from those "susceptible to radicalisation", while the other one would make it easier for authorities to exchange information about people who show signs of radicalisation.
Denmark's former centre-left government launched a review into radicalisation in prisions in the wake of the February Copenhagen twin attacks by gunman Omar El-Hussein, who killed a filmmaker outside a free speech event and a Jewish security guard outside a synagogue.
The 22-year-old Dane of Palestinian origin, killed in a shootout with police in the early hours of February 15, had been released from prison two weeks earlier, after serving a term for aggravated assault. This raised fears he may have become radicalised behind bars.
The agency's Centre for Terror Analysis said last month that at least 125 people had travelled from Denmark to fight in Syria or Iraq since the summer of 2012, raising a March estimate of at least 115.
At least 27 of them are believed to have been killed.
While the number of people leaving was falling, those who did were younger, stayed in the conflict zone longer, and were increasingly joining the Islamic State group, it said.
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