The Dutch cabinet has approved a partial ban on wearing the face-covering veil, including in schools, hospitals and on public transport.
Prime Minister Mark Rutte told journalists on Friday the ban does not apply to wearing the niqab on the street, but only "in specific situations where it is essential for people to be seen" or for security reasons.
Rutte said the government had "tried to find a balance between people's freedom to wear the clothes they want and the importance of mutual and recognisable communication".
The prime minister said the bill, which was initiated by the Dutch Interior Minister Ronald Plasterk, did not have a "religious background".
A previous bill banning the veil even on the street and dating from Rutte's last government, which was supported by anti-Islam activist Geert Wilders, will be withdrawn.
The government said it "sees no reason for a general ban that would apply to all public places," the AFP news agency reported.
It was agreed that a new bill would be drawn up by the coalition partners of Rutte's Liberal VVD party and the Labour PvdA when they formed their coalition in 2012.
Those flouting the ban can be fined up to 405 euros (around $450).
State broadcaster NOS said that between 100 and 500 women in the Netherlands wear the face veils, most of them only occasionally.
Neighbouring France and Belgium have more restrictive bans targeting those who wear face veils, not allowing people to wear such garments in public.
A number of far-right movements across the continent have made the banning of the niqab a political objective.