Cyber bullies could be jailed for up to two years for sending messages or posting material that causes harm, following recommendations from a parliamentary committee.
Internet providers will also be forced to reveal the identity of an offending anonymous poster, under order from the District Court.
School principals will also be permitted to ask a court to take down malicious or nasty content on behalf of a student.
The Government introduced a bill last year to tackle online abuse. Parliament's justice and electoral select committee has now reported back with a raft of amendments to toughen up the legislation - which Justice Minister Judith Collins has accepted.
The committee wants the higher maximum penalty for the new offence of "causing harm by posting a digital communication" to be raised from three months in jail, or a $2000 fine, to two years in jail. This would bring the sentence in line with other harassment offences.
"We consider it important that harassment in the physical world and online be dealt with consistently," the report says.
It also recommends raising the penalty for non-compliance with a court order to six months imprisonment, or a $5000 fine, and $20,000 for a body corporate.
In a move that would target anonymous cyber bullies, the committee says the District Court should be granted power to make an order against an Internet Protocol Address Provider (IPAP) to release the identity of a hidden "communicator".
The committee wants to give school principals the option of asking a court to step in to protect children from online abuse. It recommends they be able to apply for an order "mitigating harm, by means including the taking down of material, concerning a student at their institution".
MPs also believe the author of material subject to a complaint be given 48 hours to respond.
The legislation is based on a 2012 report from the Law Commission, but was introduced to Parliament in November amid the furore of the Roast Busters scandal. It creates a new offence of inciting someone to commit suicide, which carries a maximum three-year jail sentence.
Collins says New Zealand "is leading the world with our response to this global problem and nations around the world are following the passage of this bill with interest".
- The Dominion Post