Uruguay is set to introduce legislation allowing the state to sell and distribute marijuana, a first in Latin America.
The measure was one of 15 measures to fight crime presented by President Jose Mujica's administration.
The goal was for "strict state control over the distribution and production" of cannabis, said Defence Minister Eleuterio Fernandez Huidobro.
The government will also urge that marijuana sales be legalised worldwide, Huidobro said, adding the measure could discourage the use of so-called hard drugs.
Marijuana consumption is already legal in Uruguay.
"We want to fight against two different things: one is drug consumption and the other is drug trafficking. We think the ban on certain drugs is creating more problems in society than the drug itself," the minister told a news conference.
"Homicides related to settling scores have increased and that's a clear sign that certain phenomena are appearing in Uruguay that didn't exist before," he said.
The bill would legalise and set rules for the production and sale of marijuana but would not allow people to grow the plant for their own personal use.
The proposals also include increased prison time for cases of police corruption, and tougher sentences for criminal youths.
The government did not however give details on how the new system would work.
In Uruguay about $75m changes hands each year in the illegal marijuana trade, according to official estimates.
As of last year, 20 per cent of people between 15 and 65 years old reported they had smoked marijuana at least once and about 5 per cent of respondents were habitual users.
A government survey puts the percentage of the population that consumed marijuana over the last year at 8.3 per cent, compared to one per cent who consumed cocaine in the same time.
The proposal to legalise the marijuana market is one of 15 crime-fighting measures that include tougher penalties for police corruption, crack-cocaine trafficking and juvenile offenders.