Thailand's parliament has voted to ban commercial surrogacy after outrage over the largely unregulated trade.
The draft bill, which passed its first reading on Friday by 177 votes, says violators could face 10 years in jail.
In August international media reported that an Australian couple had allegedly abandoned their surrogate son Gammy because he had Down's Syndrome.
Anger over Thailand's surrogacy trade increased when a Japanese man was found to have fathered nine surrogate babies.
Thailand's ruling military junta, which seized power in May, promised to end commercial surrogacy.
"We want to put an end to this idea in foreigners' minds that Thailand is a baby factory," Thai lawmaker Wallop Tungkananurak told AFP news agency.
Commercial surrogacy was supposedly banned by Thailand's Medical Council in 1997.
The body explicitly said "no compensation may be made" to the gamete donor or impregnated woman.
It added that the woman carrying the baby must be a "relative by blood of either party of the couple".
Nevertheless, a booming surrogacy industry has sprang up in Thailand, attracting many foreigners.
Recently though, Thailand has been hit by a number of scandals over its surrogacy trade.
The first came when a Thai surrogate mother alleged that Australians David and Wendy Farnell had left her with Gammy - who also suffers from a congenital heart condition and a lung infection - but taken his twin sister home.
Pattharamon Chanbua further claimed that the couple had asked her to terminate the pregnancy, violating her Buddhist beliefs, when they realised Gammy was disabled.
The Farnells denied the allegations, telling Australian media that they had wanted the child but Ms Chanbua insisted on keeping him.
Under Thai law, surrogates are seen as the legal mothers of the children they give birth to.
Shortly after Gammy's case and the discovery of the Japanese man's children, the Thai government imposed restrictions on couples leaving with surrogate babies.
The decision affected dozens of couples who were required to have a court order to take their children home.