Germany's interior minister Thomas de Maiziere held a press conference announcing the proposal after meeting with representatives of Google, Apple, Microsoft and others.
He told reporters that he had suggested the creation of a data protection code to which companies would sign up.
De Maiziere said that his plan that a code be drawn up by 7th December "met with approval", according to the Associated Press news agency. A Google spokeswoman said, though, that the company was keen to discuss ideas but had not signed up to a firm plan.
Internet publishers and service providers should ensure that they operate "data protection-friendly basic settings" and give information "in a user-friendly way" about the gathering and intended use of data, the minister said, according to a report by Associated Press.
The German minister appeared to suggest that if companies did not adopt satisfactory new rules, the German government would create more restrictive privacy laws.
He said that the government had not come to a final view about new laws, but that a voluntary code of sufficient strength and scope could "make special legislative regulations unnecessary, at least in part".
Google in particular has come under pressure in Germany over its privacy practices. An investigation was launched after enquiries by German data protection authorities revealed that the company had gathered Wi-Fi network data while it drove around cities taking photographs from its Street View service.
Google announced this summer that it would launch photo-mapping Street View in Germany this year. German privacy concerns prompted the company to make a concession, allowing citizens to demand that their homes not be shown before the service is even launched.
The Google spokeswoman confirmed that Germany is the only country in which this happens, and that it has no intention of extending that practice to other countries.
"Online mapping and geographical tools are becoming ever more important for citizens, authorities and companies – a trend which is only set to increase through the tremendous growth of the mobile internet," said Google in a statement. "Any future legislation must make sure that in addition to the requirements of data protection, the development of innovative business opportunities and modern technology are allowed to flourish. We’re happy to contribute to constructive conversations around the design of any such frameworks."
Privacy concerns in the EU have forced Google to change the Street View services when launched in Europe. It agreed to automatically blur faces and number plates, and to delete the unblurred images after a time.