The French Council of the Muslim Faith (CFCM), an umbrella organisation of Muslim groups, said on Friday it had taken the decision with the support of all its members after receiving lawyers' counsel.
The council decided "to engage legal action against the newspapers that published the caricatures", it said in a statement after a closed-door meeting in Paris.
Five French newspapers have published caricatures of the prophet that have created an international furore: dailies France Soir, Liberation, Le Figaro and Le Parisien, and satirical weekly Charlie-Hebdo.
The council's secretary-general, Haydar Demiryurek, said the lawsuit would probably focus on France Soir and Charlie-Hebdo.
It was not immediately clear on what grounds the legal action would be based.
CFCM said last Saturday that it had called in lawyers to examine whether there were grounds for judicial recourse against the newspapers.
The caricatures, first printed in a Danish newspaper and reprinted in newspapers in several European countries, have inflamed passions among Muslims around the world.
Chirac urged the French to avoid
injuring the belief of others
France Soir's chairman, Jacques Lefranc, was fired by the paper's Egyptian owner after it republished the cartoons last week.
The daily's offices were evacuated this week after a bomb alert.
Lefranc said in an interview with AP the furore over the cartoons raised questions about whether France was going to have to compromise on its freedoms to assuage its Muslim population - the largest in western Europe, an estimated five million.
"Are we going to have to change our freedoms because we have a new population that perhaps has a different culture, or are they going to adapt?" he asked.
Lefranc said he had not been informed in writing why he was fired, but noted that France Soir owner Raymond Lakah, an Egyptian Christian, told a French news agency that it was because of the caricatures.
"I find it unacceptable that in France a shareholder fires a director because the contents of the newspaper displease him," Lefranc said.
He said he had opposed publishing the caricatures because he saw the real news as being Denmark and the violent reaction against it in Arab and Muslim countries.
"In reporting this issue, should we have published the caricatures? I am not certain," he said, adding that he respected the final choice by the newspaper's editor to publish.
Moroccans protested against the
cartoons in Rabat on Friday
Jacques Chirac, the French president, met CFCM President Dalil Boubakeur as the uproar swelled last week, and urged his countrymen to exercise "responsibility, respect and measure" to avoid injuring the beliefs of others.
Lefranc accused Chirac of backsliding on freedom of expression, insisting the president "says that we should practically self-censor".
French officials have defended freedom of expression - within limits - and counselled those who felt offended by the caricatures to put the issue to judicial authorities.
In Jordan, more than 10,000 protesters demonstrated in the capital Amman after Friday prayers, calling on Arab and Islamic countries to sever diplomatic relations with Denmark.
Meanwhile, more than 25,000 people, some burning Danish and Norwegian flags, marched in Morocco's capital to protest against the publication of cartoons of the Prophet Muhammad in European media.
Friday's demonstration, organised by several unions and political parties, took place peacefully in downtown Rabat under a sizable police presence.
King Mohammed VI's council of
ulemas condemned the cartoons
Many marchers held aloft copies of the Quran, or brandished hundreds of banners and signs in English, Arabic and French. One read "No to anarchic freedom, yes to the respect of values," while another said "Muhammed is great, Zionism is collapsing."
The Interior Ministry estimated the turnout at between 25,000 and 30,000, though march organisers said that more than 100,000 took part.
The government and the High Council of Ulemas - which is headed by King Mohammed VI - have condemned the publication of the cartoons.
In Nairobi, Kenya, police shot and wounded one person on Friday as they sought to keep about 200 demonstrators protesting against the cartoons from marching to the residence of Denmark's ambassador.
About 60 protesters in Tehran threw firebombs at the French Embassy, shattering nearly every window on its street facade, even after a cleric at one of the Iranian capital's most prominent mosques urged people in his Friday sermon not to attack diplomatic missions.