The country's Vice Industry Minister Xin Guobin, said the plan had started with “relevant research” but that it had not yet decided when the ban would come into force.
Guobin told the China's official news agency Xinhua, that the measures in place would bring profound changes in China's car industry's development considering that the country had become the world's biggest car market.
China made 28 million cars last year, almost a third of the global total. Both the UK and France have already announced plans to ban new diesel and petrol vehicles by 2040, as part of efforts to reduce pollution and carbon emissions.
Chinese-owned carmaker Volvo said in July that all its new car models would have an electric motor from 2019.
Geely, Volvo's Chinese owner, aims to sell one million electric cars by 2025.
Other global car firms including Renault- Nissan, Ford and General Motors are all working to develop electric cars in China.
Automakers are jostling for a slice of the growing Chinese market ahead of the introduction of new rules designed to fight pollution.
China wants electric battery cars and plug- in hybrids to account for at least one-fifth of its vehicle sales by 2025.
The proposals would require 8% of automakers' sales to be battery electric or plug-in hybrids by next year, rising to 12% in 2020.
Xin predicted the change would create “turbulent times” in the industry. The shift will also have a knock-on effect on oil demand in China.
The country is currently the world's second-largest oil consumer after the U.S.