Attacks on computer networks are among the biggest emerging threats to the UK, the government has said in its new national security strategy.
The report highlights cyber crime, alongside terrorism and a flu pandemic, among the key dangers to UK security.
There will be an extra £500m to bolster cyber security, focused on protecting key infrastructure and defence assets.
Foreign Secretary William Hague said that, unless addressed, this could threaten the UK's "economic welfare".
The strategy will form the background for Tuesday's Strategic Defence Review, where annual cuts of 8% to the defence budget over the next four years are expected.
The National Security Council, set up by David Cameron in May, has published an updated approach to national security which identifies 16 threats to the UK.
The most serious - which it is calling "Tier 1" - comprise acts of international terrorism, hostile computer attacks on UK cyberspace, a major accident or natural hazard such as a flu pandemic, or an international military crisis between states drawing in the UK and its allies.
In the foreword to the document - released to Parliament on Monday - Mr Cameron and his deputy prime minister Nick Clegg argue that the UK needs to think completely differently about the type of threats it faces.
"We are entering an age of uncertainty," they write. "This strategy is about gearing Britain up for this new age... weighing up the threats we face and preparing to deal with them.
"As a government we have inherited a defence and security structure that is woefully unsuitable for the world we live in today. We are determined to learn from those mistakes and make the changes needed."
Scenarios included in "Tier 2" include an attack on the UK using weapons of mass destruction, a civil war in a region of the world which terrorists could exploit to threaten the UK or an significant rise in organised crime.
However, a conventional large-scale attack on the UK is ranked only in "Tier 3" of possible dangers, alongside disruption to oil and gas supplies, a serious accident at a nuclear power station, an attack on a Nato ally and interruptions to food supplies.
Mr Hague said the strategy specified, for the first time, the threats that the UK "most had to prepare for".
"This country needs an increased capability to protect ourselves, not only against cyber attacks on the government but on businesses and on individuals," he said.
"Such attacks can, in the future, become a major threat to our economic operations in the country and to our economic welfare but also to national infrastructure, such as electricity grids and so on. We have to make sure we are protecting ourselves and that is why there is £500m of additional funding coming for that area."
The BBC's security correspondent Frank Gardner said the new money to bolster cyber security comes amid evidence that hundreds of malicious e-mails were already being aimed at government computer networks each month.
This was designed to combat concerns that terrorist groups might be able to hack into critical infrastructure such as air traffic control networks and other cases of "cyber espionage" where rogue groups or even foreign states seek to break into computer systems to obtain top secret information.
Mr Hague also said the government had to "factor in" the possibility of an increase in violence from dissident groups in Northern Ireland in future calculations.
The security strategy comes 24 hours before the long-awaited defence review - in which ministers will spell out the UK's future military capabilities - and ahead of Wednesday's Spending Review, in which the Ministry of Defence, Home Office and Foreign Office are all set to see their budgets cut.
But Mr Hague said it was possible to keep the country secure while cutting spending if the process was handled in a "sensible way".
Labour - which developed the first national security strategy in 2008 - said the plan was designed to take attention away from the damage that the cuts will do.
"The government seem to be producing a reheated security strategy to provide cover for a rushed defence review rather that producing a renewed and careful consideration of the UK's defence and security priorities," said shadow foreign secretary Yvette Cooper.
And Conservative MP Bernard Jenkin, who is chairman of the Commons Public Administration Committee, said it was difficult to see how an effective National Security Strategy could be developed against the backdrop of cuts.
"We seem to be operating under the imperative of deficit reduction," he said.
"But, there's very little in what's being done now that reflects deep and sustained analysis about what sort of country we want to be in 10 or 20 years time."
In a new report, the cross-party committee said there was a lack of strategic thinking at the heart of government over security, defence and foreign policy and a tendency to "muddle through" rather than be forward thinking.
"And the SDSR [strategic defence and security review] is a case in point because the Ministry of Defence should have done the work, saying 'look, if we are going to have to live within a much smaller envelope, how do we completely re-do the way we do defence?'.
"Instead it's just been about 'what do we have to cut? What do we hang on to and what do we cut?'."