The lagoon in the shoal would be declared a "no-fishing zone," but fishing would be allowed in the deeper waters around the shoal, Philippine National Security Adviser Hermogenes Esperon Jr. said Monday.
The Philippines and China have fought over the Scarborough Shoal for years. In 2012, China routinely harassed Filipinos fishing in the area, even though it is inside the 200-nautical mile exclusive economic zone of the Philippines.
In July, an international tribunal ruled against China, saying it violated the rights of Filipinos by banning them from fishing. But China ignored the ruling, which also invalidated its right to most of the South China Sea.
Duterte, who took office in June, has initiated a new foreign policy, befriending China and criticizing its longtime ally, the United States.
The move to ban fishing in the Scarborough Shoal lagoon has been supported by environmentalist and former president Fidel Ramos, who in August met with Chinese leaders in Beijing as Duterte's special envoy. He called the move to create a marine sanctuary there "the highest form of aquaculture preservation."
"We will mobilize government forces to promote our agreements, step up guidance to create a favorable environment," Chinese Presidential Communications Secretary Martin Andana said in Peru.
The two Asian leaders have hit it off.
"I guess on a personal level as well as at an official level, the two leaders are resolving the issue," Philippine Secretary Ramon Lopez said. "With that renewed friendship, it really opened up a lot of opportunities. Now, we are talking of economic cooperation. Previously this topic was not discussed,"
Duterte also held his first bilateral meeting Sunday with Russian President Vladimir Putin.
He praised Russia as a "great country" with his acknowledged idol and criticized the United States.
"Of late, I see a lot of these Western nations bullying small nations," Duterte said he told Putin. "And not only that, they are into so much hypocrisy."
Putin said Duterte has been "developing the all-round partnership between our countries and with respect to promoting greater trust and confidence between us."