Interior Minister Nancy Faeser said that "especially since (Russian President Vladimir) Putin's war of aggression against Ukraine, we have seen that drones are being used more and more frequently, which poses an increasing challenge for the police and their current technology".
The ministry said that "security services have noted that reports of sightings of uncooperative drones over critical infrastructure and military properties in Germany are increasing".
"Espionage or sabotage are regularly considered as a possible reason," it added in a statement.
Under current regulations, soldiers can assist the police in forcing an unmanned aerial vehicle (UAV) to change direction or land, threaten to shoot it down or fire warning shots.
But under the new proposals, a drone could be shot down by the army if it is believed the device is being "used against the lives of people or against a critical facility, and the use of armed force is the only means of averting this present danger", the ministry said.
Unidentified drones have been spotted flying over several military bases and other sensitive sites in Germany in recent months, at a time when the country is on high alert for Russian espionage.
Police in the southern state of Bavaria this week said they were looking into several incidents in which drones had flown over military installations in Manching and Neuburg an der Donau.
The Manching site hosts a military aerodrome and is where the Eurofighter jet is developed by Airbus.
Several drones have also recently been spotted at an industrial zone near the North Sea and near the US airbase in Ramstein.
The changes must still be voted through in the lower and upper houses of parliament before becoming law.
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