Peter Mandelson says the government backs a recommendation to increase the takeover threshold for shareholder ballots to two-thirds.
The business secretary, delivering his speech to Mansion House in the City, said the move would not have prevented the recent takeover of British chocolate firm Cadbury by American food giants Kraft.
But he argued it would have improved the scrutiny of the bid and helped the owners of both companies weigh the interests of all concerned more carefully.
"We must not get drawn into a narrow debate about foreign ownership, which is not the issue," Lord Mandelson said.
"More important is the need for reform to promote corporate stewardship and long-term engagement and ownership amongst shareholders, boards and their directors."
The provisions of the takeover code are being reassessed by the takeover panel after Roger Carr's suggestions reflecting the Cadbury/Kraft takeover.
Lord Mandelson said that he believed there also is a case for lowering the disclosure requirements on a bid from 1% to 0.5%; give bidders less time to "put up or shut up"; and require bidders to set out the financing plans for their bids "not just on day one, but over the long-term".
"Some people have gone further and suggested that we need a new form of public interest test to guard British companies against foreign acquisition. I am happy to have an open debate about this, but I think we need to be very cautious about this," Lord Mandelson cautioned.
"Britain benefits from inward investment and an open market for corporate control internationally. A political test for policing foreign ownership runs the risk of becoming protectionist, and protectionism is not in our interests."
The first secretary attacked shadow chancellor George Osborne's own assessment of the public finances, calling his Mais lecture "longer on assertion than specific proposals".
He warned that the only area of clarity was in the Conservatives' determination to "cut now, this year, regardless of the fragility of the economy".
Lord Mandelson added: "To cut public spending now as the shadow chancellor proposes could easily plunge the economy back into recession."
Britain emerged from recession in the final quarter of 2009 with positive growth of 0.3%, after 15 consecutive months of contraction.
Lord Mandelson said that "nobody is hanging out the bunting" for the 0.3% figure, but insisted that the government's unprecedented interventions of 12 months ago had helped rescue the economy from a much worse fate.