Coalition MPs want to force environment groups to dedicate a quarter of their income to planting trees, controlling pests or wildlife rehabilitation.
A government-led parliamentary committee also wants to suspend for five years the charitable status of environment groups that "encourage, support, promote or endorse" illegal activity.
Those activities could range from trespass to blocking access to violence and assault.
Under the committee's plan an environment group would have to prove at least 25 per cent of its expenditure was dedicated to "environmental remediation".
The report, handed down on Wednesday, said the purpose of granting charitable status "should be to support practical environment work in the community".
It does acknowledge that "diverse range of activities contribute to meaningful and lasting environmental outcomes".
However, the report prompted one Liberal MP to break away from his colleagues - with Jason Wood noting his concern about the recommendations.
He fears the exclusion of education, research and advocacy in the definition of "environmental remediation" would harm several groups and therefore be counterproductive.
The MP uses the group For the Love of Wildlife as an example of one that has "no-on-the-ground work" and specifically focuses on education, policy advocacy and exposing crime.
Mr Wood also said illegal actions by activists like blockades had prevented major environmental disasters.
For example, the Franklin River in Tasmania, where activists stopped damming at the World Heritage site and protests against whale hunting in the Southern Ocean.
While congratulating the committee on its work, Labor MPs disagreed with the report's finding that environment groups should be performing on the ground work.
"The Labor members of the committee find it extraordinary that government members have recommended to, in effect, constrain the capacity of environmental organisations to engage in advocacy work," Labor wrote in a dissenting report.
Environment groups are furious with the recommendations, with Greenpeace urging the government to reject the report.
The Australian Greens condemned the "politically motivated witch-hunt against the voices for nature".
The Bob Brown Foundation labelled as hare-brained the proposal that 25 per cent of income go to environmental remediation.
"Is like demanding that 25 per cent of church income go to running Sunday schools or that 25 per cent of political parties' income must be spent on printing and distributing the constitution," the former Greens leader said.
"Moscow would love it."
