People who publicly threaten or incite violence against others based on their race, religion, gender or sexuality - including online - could be jailed for up to three years under proposed laws in NSW.
The state government on Tuesday acknowledged provisions in the existing Anti-Discrimination Act were "ineffective" and had allowed some people to escape punishment for vile acts.
Not a single person has been prosecuted under the laws since they were introduced nearly 30 years ago.
Attorney-General Mark Speakman, who introduced the changes in parliament on Tuesday, insisted the proposal was not an infringement on free speech.
"This has nothing to do with saying things controversial, with robust debate, with intense criticism of other groups," he told reporters in Sydney.
"This is about stopping violence. This is about stopping threats and incitement of violence and keeping our community safe."
The legislation will create a new criminal offence of publicly threatening or inciting violence against people on the grounds of race, religious affiliation, sexual orientation, gender identity, intersex or HIV/AIDS status.
It will include a maximum penalty of three years' jail and a fine of $11,000 - six times greater the existing maximum prison sentence of six months.
Mr Speakman said the offence will apply to any threat that is made public - whether it be on the street, on a website or via social media.
"We want to send a very strong message to the community that inciting or threatening violence will not be tolerated," he said.
Labor welcomed the move, saying it was a long-time coming.
"Tough new laws will send a signal to the likes of the extremist fringe that their brand of racism is no longer tolerated under the law," opposition leader Luke Foley said in a statement.
A parliamentary committee recommended changes to the state's racial vilification laws back in 2013.
Keep NSW Safe, a coalition of 31 community groups and leaders which has been campaigning for new laws for the past three years, thanked the government for taking "this important step".