The package of bills approved requires Internet users to use their real names to identify themselves to service providers when entering agreements to access the Web, China's state-run Xinhua news agency reported.
The decision to approve, which has the same legal effect as a law, was adopted by lawmakers at the closing meeting of a five-day session of the Standing Committee of the National People's Congress.
The move is designed to "ensure Internet information security, safeguard the lawful rights and interests of citizens, legal entities or other organizations and safeguard national security and social public interests," the decision indicated.
The 12-article document includes an identity management policy requiring users to use their real names when signing contracts with service providers for Internet, land-line telephone or cellphone service.
Critics said they believe the package is an effort by the government to limit freedom of speech and that China's new leadership considers the Internet as a threat, the BBC reported.
In recent months, the Internet and online social media have been used to coordinate protests. Also, reports involving alleged corruption of several Communist Party officials surfaced on the Internet.
Penalties for violation of the legislators' decision include confiscation of illegal gains, revocation of licenses, closure of websites, as well as a ban on engaging in the web-related business, Xinhua said.