The government plans to share tactics and technology with businesses to combat cybercrime and protect the UK's growing internet economy.
Intelligence agency GCHQ will work more closely with firms and could share its technology commercially.
The government says internet business generates about 6% of the UK's GDP - more than agriculture or utilities.
Its Cyber Strategy also encourages courts to use powers to restrict computer use by cyber criminals.
Constant attacks by cyber criminals, activists, hackers and foreign states trying to steal official and commercial secrets mean cyber-attacks are now ranked on a par with international terrorism as a threat.
'World class expertise'
The government says there are more than 20,000 malicious emails sent to its networks each month, 1,000 of which are deliberately targeted.
Ministers have set aside £650m of new money to better protect key infrastructure and defence assets from "cyber warfare".
The strategy published on Friday says that about half of that money will go to the government's listening post - GCHQ - in Cheltenham to increase its ability to fight off cyber attacks.
Ministers say they are also looking at ways that GCHQ's "world class expertise" in the area might be used to help businesses - for example looking at whether encryption techniques and other expertise that is not considered top secret might have commercial applications.
The government also plans a new Defence Cyber Operations Group - which will include a unit at GCHQ which will develop "new tactics, techniques and plans to deliver military effects, including enhanced security, through operations in cyberspace".
Much of the strategy focuses on improving links with the private sector on the issue of cybercrime - with "hubs" to allow information to be shared on cyber threats and a pledge to look at new ways to bring together businesses, academics and government to exploit the latest innovations in tackling the threat.
The government says the internet is a growing part of the UK economy - predicted to create 365,000 jobs over the next five years. Cabinet Office Minister Francis Maude told the BBC the aim was to "make the UK one of the most secure places in the world to do business".
"The attitude at GCHQ, the willingness to collaborate with the private sector is very clear and evident ... we're looking for ways for GCHQ to collaborate with the private sector, looking at the commercial exploitation of some of their intellectual property and capability."
Individuals will be given more help to protect themselves, amid a warning from GCHQ that 80% of successful attacks could be thwarted by following simple steps like updating anti-virus software regularly.
The strategy suggests "kitemarking" cybersecurity software to help consumers and businesses avoid "scareware" - software which purports to be helpful but is, in fact, malicious.
But the strategy also urges police, prosecutors and the courts to use existing powers to restrict and monitor computer use by convicted cyber criminals, who are considered likely to strike again online.
The Ministry of Justice and Home Office will also consider whether orders restricting internet use can be enforced using "cyber tags", software which triggers automatic warnings to the police or probation service that a suspect is breaching an order.
And all police forces will be encouraged to follow the lead of the Metropolitan Police and train "cyber specials" with expert knowledge of cybercrime.
David Clemente, a cyber security expert at Chatham House, told the BBC the government's strategy was a "promising step" - but it would be a challenge to deliver the dozens of actions listed when government spending is so tight.
Earlier this month, Iain Lobban, the head of GCHQ, told a cyber security conference in London that a "significant" attempt was made to target the computer systems of the Foreign Office and other government departments over the summer.
Baroness Neville-Jones, the PM's special representative to business on cybersecurity, said Russia and China - who both attended the conference - were some of the worst culprits involved in cyber-attacks.
Foreign Secretary William Hague has said cyber-attacks could become a major threat to the country's economic welfare and its national infrastructure, such as electricity grids.