Internet firms will be required to give intelligence agency GCHQ access to communications on demand, in real time.
The Home Office says the move is key to tackling crime and terrorism, but civil liberties groups have criticized it.
Tory MP David Davis called it "an unnecessary extension of the ability of the state to snoop on ordinary people".
Attempts by the last Labour government to take similar steps failed after huge opposition, including from the Tories.
'Unprecedented step'
A new law - which may be announced in the forthcoming Queen's Speech in May - would not allow GCHQ to access the content of emails, calls or messages without a warrant.
But it would enable intelligence officers to identify who an individual or group is in contact with, how often and for how long. They would also be able to see which websites someone had visited.
In a statement, the Home Office said action was needed to "maintain the continued availability of communications data as technology changes".
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