After curbing the epidemic by imposing a rigid lockdown between March and May, Italy has seen a steady increase in new cases in the last two months, reporting an average of more than 2,400 infections daily in the past week, a Reuters tally shows.
The decree imposing masks outdoors will probably be effective from Thursday, a government source said.
Several Italian regions including Lazio, around the capital Rome, have already made face masks mandatory.
Italy has the highest death toll in continental Europe with over 36,000 confirmed fatalities since its outbreak came to light on Feb. 21.
However, its daily infection numbers are now much lower than those recorded in other major European countries such as France, Spain and Britain.
The cabinet also approved a decree to extend the COVID-19 state of emergency to Jan.31.
The state of emergency, originally due to expire in mid-October, gives greater powers to central government, making it easier for officials to bypass the bureaucracy that smothers much decision-making in Italy.