The action plan from the State Council, or China's Cabinet, also aims to cut the country's percentage of total primary energy use stemming from coal to below 65 percent by 2017. The U.S. government estimates that China currently gets about 70 percent of its energy from coal.
New coal-fired power plants will be banned for new projects in the region surrounding Beijing, in the Yangtze Delta region near Shanghai and in the Pearl River Delta region of Guangdong province, the State Council said.
The government has come under increasing pressure from its growing middle class to clean up the country's air pollution, much of which comes from the burning of coal.
The State Council said the country's air pollution situation is "grim" and that it is "harming people's health and affecting social harmony and stability."
Environmental campaign group Greenpeace welcomed the plan, saying it would significantly slow China's growth in coal consumption and set an important precedent that other major economies should follow.
"China's political leadership has set an ambitious timeline to solve China's air pollution crisis, responding to the mandate set by the Chinese public, especially in the heavily polluted cities around Beijing," said Li Yan, climate and energy campaign manager at Greenpeace East Asia.
"The targets can only be met by tackling China's coal consumption growth and the plan takes very important steps in that direction."