"Denmark has reached the limit of the number of fish that can be raised at sea without endangering the environment... We must be a green pioneer, including fish farming," Environment Minister Lea Wermelin said in a statement.
The move means that the government will put an end to developing new aquaculture projects in the country but its 19 existing fish farms will not be affected.
The measure has been hailed by environmental groups who deplore the pollution caused by aquaculture production.
But fish farming officials have slammed the move, which they say will harm the flourishing industry.
"It's a serious setback," said the head of the Danish aquaculture federation, Brian Thomsen.
"We thought about establishing offshore farms but now it's impossible."
The federation estimates annual exports are worth 1.5 billion kroner (over $222 million/200 million euros).
Denmark has been aqua farming since the nineteenth century, but it is underdeveloped in Europe because Asia provides more than 90 percent of global production in tons.
The UN Food and Agriculture Organization(FAO) says aquaculture is probably the fastest growing food-producing sector, accounting for nearly 50 percent of the world's food fish.
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