A new tribunal to fight cyber-bullying would have the power to name and shame offenders.
It would also be able to silence cyber bullies by issuing "takedown" orders.
A new criminal offence for publishing offensive comments on Facebook and Twitter and sending hurtful text messages would also be introduced under the Law Commission proposals.
The measures are in a ministerial briefing issued today for Justice Minister Judith Collins as part of a Government crackdown on internet nuisances.
Prime Minister John Key called for a "national conversation" on reducing bullying in schools after cellphone videos of children being attacked went viral last year.
Fifteen-year-old Wanganui schoolgirl Robin de Jong was filmed being kicked unconscious by a classmate, who was later expelled.
The Herald ran a Stop the Bullying campaign in May, and the minister asked the commission to fast-track its report looking at ways of reducing harm caused by cyber-bullying.
The Communications Tribunal would operate like a "mini-harassment court" specialising in digital communication, said project leader Professor John Burrows.
It could issue statutory orders including cease and desist notices or orders requiring retractions, apologies or rights of reply. It could also reveal the identity of offenders, via the media or in its decisions published online.
Professor Burrows said the tribunal would be headed by a district court judge, supported by an IT adviser.
Complaints would first be referred to an approved agency - such as Netsafe - and could be settled by mediation.
In serious cases, accused offenders could be charged under the Summary Offences Act for publishing material which is "grossly offensive or of indecent, obscene or menacing character or knowingly false".
The law would apply to anyone over the age of 14 and carry a penalty of up to three months' imprisonment or a fine of $2000.
"There are laws under the Crimes Act, like threatening to kill someone, which can be applied to anything," Professor Burrows said.
"But it doesn't deal specifically with the internet, and as technology grows, we want to patch up any existing gaps."
The offence exists in Britain, and 25-year-old Englishman Sean Duffy was jailed for four months last year for leaving hurtful messages on a tribute page for a 15-year-old schoolgirl who committed suicide.
The commission is also looking at amendments to existing offences under the Crimes Act. The charge of inciting a person to commit suicide now applies only if the victim has committed or attempts suicide.
But under the proposed new law, a person could be charged irrespective of whether their victim made any suicide attempt.
The offence of publishing intimate photos or recordings without consent now applies only if the photos were taken without consent.
But under the change, a person could be charged even if the victim had consented to the pictures being taken.
The commission has also recommended that schools be legally required to implement policies on cyber-bullying, including guidelines on dealing with incidents and educational programmes for students.
It received about 60 submissions, including one from the Post Primary Teachers Association which said there was a lack of clear and authoritative channels for dealing with serious complaints.
President Robin Duff said that although some social media sites had channels to have offensive material removed, it often took days and apologies were not easily sought.
The commission proposed that principals, police and coroners have direct access to the tribunal.
Ms Collins welcomed the recommendations last night.
"We must not underestimate the devastating impact this new form of bullying has, particularly on young people," she said.