The new technology is included in a package of anti-terrorism measures agreed on 7 November by the German government. Similar measures are also under consideration in other European countries.
The bill, proposed in the aftermath of the 11 September terrorist attacks in the US, is still to be approved by the Bundestag, the German parliament.
Ordinary IDs, which carry only the photograph and the signature of the bearer, are too easily misused, the German Interior Ministry said. Digitally encrypted biometric data, however, would enable the "absolutely certain" establishment of an individual's identity.
Officials could not yet offer any details about what technology might be used.
"Various different measures are being considered - whether a fingerprint scan or a face scan; it's up to the Bundestag to decide which ones are most efficient," said Gabi Holtrup, a spokeswoman for the Interior Ministry.
But the proposed security measures, which also include increased co-operation between secret services and police and expanded surveillance of electronic communication, have been sharply denounced by German human rights activists.
In a joint statement on 6 November, more than 20 human rights and privacy groups - including the hackers' organisation Chaos Computer Club - criticised the package.
"Not one of the measures proposed in the bill would serve to hinder strikes like the New York attacks. Nonetheless, guaranteed basic rights and freedoms of both German and non-German citizens will be curtailed without justification by the planned measures," the activists wrote.
The security bill carries a provision calling for the new security measures to be reviewed after five years, but its opponents are not reassured.
"It must not be forgotten that the newly created structures will surely have a great interest in demonstrating 'successes'," the human rights groups wrote. "Experience shows that surveillance measures, once introduced, are only repealed in exceptional cases."
Related security measures are being discussed on a European Union level, but "that process takes a lot longer", Holtrup said.
Most EU countries, with the notable exception of the UK, issue national ID cards to their citizens. Proposals to introduce a national ID in the UK and US - including an offer by Oracle chairman, Larry Ellison, to donate the software to create an identity database - have sparked a heated debate.
Italy has begun issuing electronic ID cards to its citizens, following a similar programme in Finland. The Italian cards feature microprocessors and optical memory bands, and carry identity details as well as health and tax information intended to allow citizens to interact with government services electronically.