"Canada's advanced research ecosystem is at the forefront of global discovery, but it can also be an attractive target for foreign state actors that pose a risk to our national security," the ministers of science, health and public safety said in a joint statement.
To that end, "grant applications that involve conducting research in a sensitive research area will not be funded" if any of the participants are affiliated with a university or institute that has ties to foreign security bodies deemed hostile to Canada.
The government also asked universities to adopt similar guidelines.
The statement did not specify which areas are considered sensitive.
The move comes after the Globe and Mail newspaper revealed in January that dozens of Canadian universities had for years collaborated with scientists linked to the Chinese military.
In November, Canadian police arrested a former researcher for the Hydro-Quebec electricity company on charges of spying for China, a first in Canada.
Relations between China and Canada have deteriorated sharply in recent years, particularly after the arrest by Canada at Washington's request of Huawei chief financial officer Meng Wanzhou in 2018.
In response, China held two Canadians in prison for nearly three years and released them after Meng reached a deal with US authorities that allowed her to return to China.
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