Netanyahu said he would fly to Africa to discuss with government leaders in several states the return of migrants to their countries of origin. His trip is expected to take place in three months.
The bulk of the infiltrators come from Sudan and Eritrea but Netanyahu said almost all were labour migrants and not bona fide refugees.
"Refugees are a small portion of this stream," he said.
"We will continue to look after them. But we have no obligation to receive illegal migrants."
There are just over 50,000 illegal migrants in the country but they are now arriving at the rate of about 2000 a month, Israeli officials say.
They make the arduous trip across the Sinai desert with the aid of Bedouin guides.
The migrants have come to form sizeable blocks in cities in southern Israel and in the poorest sections of Tel Aviv.
Many residents and local officials have protested at their presence, citing increased crime and sanitation problems.
The Cabinet also decided to impose fines of up to US$20,000 on enterprises employing illegal immigrants.
"If need be, we'll shut down these enterprises so that the enterprise we call 'the State of Israel' won't be shut down," said Netanyahu.
Israel presently has a detention centre not far from the Sinai border which holds about 2000 infiltrators. It will now be tripled in size.
The border fence was initially designed principally to prevent terrorists from crossing into Israel from Egyptian territory but the prevention of huge legal immigration has come to be seen as a task of no less urgency.