The Suppression of Foreign and International Terrorism Bill comes in the wake of the brief detention earlier this month of opposition members and police officers who later had charges of stocking arms and plotting to assassinate Mugabe dropped.
Authorities had accused the men of working with a foreign-based organisation called the Zimbabwe Freedom Movement which it says has been plotting to end Mugabe's 26-year rule.
"The phenomenon of terrorism that is waged on an international scale is not adequately addressed by our existing laws, nor is the problem of mercenaries covered in our legislation," said a note accompanying the proposal, a copy of which was obtained by Reuters on Monday.
"This bill will provide for the suppression of foreign and international terrorism, including mercenary activity," it said.
It is likely to sail through parliament where Mugabe's Zanu-PF party enjoys a comfortable majority.
In 2004 Zimbabwe arrested 70 mostly South African citizens after impounding their plane en route to what authorities say was a mission to overthrow the government in Equatorial Guinea.
Initially the government said the men would face mercenary charges in Zimbabwe, but these never materialised in court, where the group was convicted on violating lesser immigration, aviation and firearms laws.
In this year's alleged assassination plot, a Zimbabwe court last Friday denied bail to an ex-soldier in the country's pre-independence white government who remains in custody over the case. Some political analysts saw the arrest as an attempt to put pressure on Mugabe's opponents.
The state says an array of weapons found in the eastern city of Mutare were meant to be used to disrupt Mugabe's 82nd birthday celebrations there last month.
Mugabe, in power since independence from Britain in 1980, accuses the opposition of working with Western countries to try to oust him from power, mainly over his seizure of white-owned farms for redistribution to poor blacks.
The draft law defines mercenary activity as "an act aimed at overthrowing a government or undermining the constitutional order, sovereignty or territorial integrity of a state or ... private military-related assistance in an armed conflict between two or more states or within a state." "Any person who ... engages or participates in any foreign or international terrorist activity shall be guilty of an offence and liable to imprisonment for life or any shorter period," it said.
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