To face up to the threat, Sarkozy announced a "massive investment effort in intelligence" that will make use of satellites, drones and other airborne surveillance equipment.
The investments will be offset by cuts in the armed forces, with the army, navy and air forces to be downsized to 225,000 troops - a reduction of about 45,000.
Sarkozy also confirmed that France will return to Nato's integrated command, which it left in 1966.
But he said its nuclear deterrent forces would remain under strict national control and emphasised that France remained "an independent ally, a free partner".
"We can renew our relations with Nato without fearing for our independence and without the risk of being unwillingly dragged into a war," he said.
The new security doctrine followed the release on Monday of the first review in 14 years of the French military by a panel of 35 experts.
It reflects a shift for France, making homeland security part of its defence strategy.
France's defence spending will total $583bn from 2009 to 2020 including about $310bn that will be spent on equipment, Sarkozy said.
As of 2012, the military budget will increase, he said.
"We can renew our relations with Nato without fearing for our independence and without the risk of being unwillingly dragged into a war"
Some 50 military bases, garrisons and other defence facilities are to be closed in a move that has already triggered protests in towns that fear economic hardship.
The new policy sets at 30,000 the number of combat-ready troops, down from its current targeted level of 50,000, and calls for shutting down some of France's four permanent bases in Africa.
Underscoring the focus on intelligence gathering, a new national security council will be set up at the Elysee Palace.
Bernard Bajolet, a former ambassador to Iraq and Algeria, has been named to the newly created post of national intelligence co-ordinator.
Sarkozy pledged to pursue his drive to build a 60,000-strong European defence force despite Ireland's rejection of a key EU reform treaty as France takes over the EU presidency in July.
"There is a very strong emphasis on intelligence, recognising that the world may not be more dangerous than it was in 1994... but it seems more unpredictable," Bruno Tertrais, a member of the expert panel, said.
"For the first time in centuries, France does not base its defence policy on the hypothesis of a major military conflict in Europe and that is quite revolutionary."
Jaap de Hoop Scheffer, the Nato secretary-general, welcomed Sarkozy's decision for France to fully reintegrate into the military alliance.
"I have said many times before that I will very much enjoy France taking again its full position in Nato," he told Associated Press Television News.
Scheffer said France "has always been a very active member".
Asked whether he believes France is moving closer to Nato, Javier Solana, the EU foreign policy chief, who was attending an arms show outside Paris on Tuesday, gave an emphatic yes.
"I don't know when or the way of doing it, but the rapprochement of France to Nato it's a done deal," he said.