Migrants could face a primary-school level conversational English test as a requirement to becoming permanent Australian residents and citizens.
Prime Minister Malcolm Turnbull said speaking English was the key to integrating in society and engaging with the economy and education.
"Everyone should recognise we all have a vested interest in being able to converse and engage in the national language," Mr Turnbull told reporters in Hobart on Thursday.
He said the initial goal of primary school-level English was reasonable, saying it was an obvious measure to help migrants achieve in Australia.
Citizenship Minister Alan Tudge said Australia could move to a locally designed test focusing on conversational English, rather than using international exams.
"If you have a lot of people not speaking the language then you start to get social fragmentation and we don't want to see that happen," Mr Tudge told Sky News.
He said the government was considering extending the test to make it a requirement for permanent residency.
"We're looking at whether or not we can have a reasonable, basic conversational English language requirement at that stage," Mr Tudge said.
"We want people to be able to interact with one another, work together, play together and continue to contribute to Australian society."
Mr Tudge said he was concerned about the increase in non-English speakers in Australia, with the figure approaching a million.
He wants to avoid "parallel communities" developing, which he said were an issue in some European countries.
Labor immigration spokesman Shayne Neumann said the government would be better off acting on a parliamentary committee's recommendations to expand and improve migrant English language education programs.
"Minister Tudge needs to explain where this has come from and what evidence it is based on," Mr Neumann said.
"We still haven't seen the detail - but we've seen this rhetoric before and the government doesn't have a good track record."
Any changes would need to pass parliament, but that is by no means guaranteed.
In March Mr Tudge said he wanted to ensure migrants make an effort to integrate and demonstrate a commitment to Australian values.
Previous changes to citizenship laws were blocked in the Senate last year and fresh talks with cross bench senators would be needed.