"The full-face veil will be banned in public spaces," Christian Kern said after ministers signed off on the new programme of policies set to be implemented over the coming 18 months.
There was no mention of a headscarf ban for civil servants but the text said that state representatives must "present themselves as religiously neutral".
Kern said he wanted to avoid "giving 600,000 Muslims in Austria the feeling that they are not part of our society."
The 35-page programme also includes beefing up surveillance and security measures, obliging migrants granted the right to stay to sign an "integration contract" and a "statement of values".
"Those who are not prepared to accept Enlightenment values will have to leave our country and society," according to the text.
It also promises the government will lower taxes and non-wage labour costs, restrict access of foreign workers to the Austrian labour market and create 70,000 new jobs.
Many of the measures set out in the programme must be hammered out in detail and receive parliamentary approval before they can come into force.
The move comes eight months after Kern, 51, replaced Werner Faymann at the head of an unhappy "grand coalition" between his Social Democrats (SPOe) and the centre-right People's Party (OeVP).
Both are facing a strong challenge from the Freedom Party (FPOe), which like similar groups across Europe has stoked concerns about immigration, security and the EU to top opinion polls.
There has been speculation for months that the Austrian coalition might call early elections. Monday's programme was aimed at showing it aims to govern until its mandate expires in late 2018.