Alison Saunders, the UK's director of public prosecutions, has said that social media users could be prosecuted for a range of offensive behaviour, including encouraging people to take part in online harassment campaigns known as virtual mobbing.
Internet bullies, commonly referred to as internet trolls, could also be faced with court proceedings under the new rules.
"The internet's not an anonymous place where people can post without any consequences. People should think about their own conduct," Saunders told BBC.
The new guidance for prosecutors in England and Wales comes after a report found that one in four teenagers is abused online over their sexual orientation, race, religion, gender or disability.
The UK's Crown Prosecution Service (CPS) also said underage "sexting" between consenting children in a relationship should not be prosecuted, but cases which involve "exploitation, grooming or bullying" may lead to legal action.
"If they are children, they are the same age, there's no suggestion or any coercion or bad motives, then we would not expect that case to be prosecuted. It shows you how careful you have to be about the context of it," Saunders said.
The latest guidance has been issued to help prosecutors identify and prosecute hate crime on social media.
It coincides with a CPS consultation paper on hate crime, which encompasses offences against disabled people as well as racial, religious, homophobic and transphobic crimes.
It has been launched to mark the start of Hate Crime Awareness Week on Monday and will be open to public comments for 13 weeks.
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