A new law was one of 40 recommendations of a study ordered by Prime Minister Gordon Brown into ways to improve relations between the public and the military.
It follows a number of high-profile incidents of apparent discrimination, including an army officer in service dress being refused entry to the Harrods store in London.
MP Quentin Davies, who carried out the study, called for "legislation making discrimination directed at those wearing military uniforms by purveyors of public or commercial services an offence".
He also said assaults or threats of violence against anyone in uniform should be considered an aggravated offence.
Armed Forces Minister Bob Ainsworth said the Government was now engaged in discussions about how such a law could be introduced.
He said: "We've all heard of the instances of military people being discriminated against.
"I do not believe that they are widespread, but I do believe they are totally and utterly unacceptable."
He said they were no different to other forms of discrimination and needed to be outlawed.
Mr Davies confirmed: "The Government have accepted that recommendation and we will get that protection."
Other incidents of discrimination highlighted by the report included troops at Birmingham and Edinburgh Airports being told to change into civilian clothes or avoid public areas, injured veterans being abused by members of the public at a swimming pool, and intimidation and abuse levelled at RAF personnel in parts of Peterborough.
The latter incident was highlighted after personnel there were told not to wear their uniform in public to avoid further incidents.
Mr Davies' report also recommended that troops should be encouraged to wear military dress on all appropriate occasions in public.
Mr Ainsworth also confirmed that the Government was considering marking a new national day of celebration of the Armed Forces by making it a public holiday.
Asked about the report's call for an Armed Forces and Veterans' Day, he said: "We need to look at the details of how and when we do this.
"We do want to take forward the proposal to recognise our Armed Forces. Whether that is a separate bank holiday of itself, whether it's a weekend, is something we would consider."
Among the report's other recommendations were an increase in the number of young people, especially at state schools, joining cadet forces and more onus on local councils to ensure local units returning from the frontline are given home-coming parades.
Liberal Democrat defence spokesman Nick Harvey said: "Many of these proposals are good common sense and should be welcomed. It is essential that the British public understands the huge sacrifice and commitment made by our servicemen and women.
"But we must never let pageantry obscure the hard facts about the way the current Government treats our Armed Forces.
"An Armed Forces Day is welcome, but it will ring hollow for those forces families who still have to put up with sub-standard housing."
Mr Ainsworth said anti-military discrimination was "as unacceptable as other forms of discrimination in our society".
"We are going to take away Quentin's recommendation and talk to agencies and other parts of Government about how we deal with that discrimination.
"We have not got a ready-made model. But deal with it we must."
The report called for "everything possible" to be done to encourage all schools to create their own combined cadet force (CCF) to give young people a taste of the military.
Only 60 exist at present in state schools - with another 200 at grammars and independent schools - and the Prime Minister has signalled that boosting that number is a priority for him.
However, the proposal is likely to prove highly controversial after teaching unions denounced schools-based cadet forces as a questionable recruiting tactic.
Mr Davies insisted there was no suggestion of forcing the idea on headteachers.
A "cadet ambassador" is to be appointed in London in a bid to promote new units and equivalents could be sent across the country if it proves successful.
The report said the organisation of home-coming parades should not be "left to chance", calling on town halls to take a more pro-active role in making them happen.
Last year, the head of the Army, General Sir Richard Dannatt, warned that a lack of public appreciation for Britain's military effort in Iraq and Afghanistan was in danger of "sapping" the willingness of troops to serve on such dangerous operations.
He said soldiers were not "supermen" and they wanted to be "understood and respected" by the wider public for their efforts.
"Soldiers are genuinely concerned when they come back from Iraq to hear the population that sent them being occasionally dismissive or indifferent about their achievements.
"We are in danger of sapping our volunteer army's willingness to serve in such an atmosphere again," he said.
Mr Ainsworth insisted that efforts made since then to encourage parades had been very successful although more remained to be done.
There was also a suggestion in the report that the Royal Tournament should be revived. The world's biggest military tattoo and pageant was axed in 1999 after more than a century.
The study revealed that television stars such as Jeremy Clarkson and Ross Kemp had been involved in discussions over "launching a modern equivalent".
More than 800 people have signed a petition on the 10 Downing Street website calling for the popular televised "showpiece of military skill and tradition" to be reinstated.
Mr Davies said there also needed to be a "major cultural change" within the military in terms of allowing officers to talk to the press and take up public invitations.
US-style rules requiring senior personnel to engage in a minimum number of public events and meetings with civilian organisations were recommended.
Mr Davies said the objective of his recommendations was "to build a series of new bridges between the military and the civilian public and people as a whole".
"The Armed Forces are a vital part of society; they are not a separate part of society. There have been tendencies to think of them as a separate part of society and we want to remedy that.
"There is great goodwill and support and respect for the Armed Forces, rather less direct personal familiarity with them as the years go by," he said.
He said he hoped the report would foster "a new era of greater openness and greater public involvement by the forces in many aspects of our national life."
Mr Ainsworth said: "Our service personnel continue to demonstrate the tremendous bravery and courage that makes them the best in the world.
"This report provides firm foundations to ensure that the work of our Armed Forces is better understood and recognised by the nation they serve."
He said the MoD would shortly publish a second report on measures to improve the welfare of the troops themselves as well as their families and veterans.
General Timothy Granville-Chapman, Vice Chief of the Defence Staff, said: "Mr Davies's report highlights the huge debt the nation owes to its sailors, soldiers and airmen.
"There is increasing public acknowledgement of this, and support for the Armed Forces in terms of home-coming parades and charitable giving has been received very well by those in uniform.
"And every week people see just what being on operations means - they see people, many of them young, giving real meaning to the idea of service and sacrifice, enduring hardship and often displaying remarkable bravery.
"The report compliments the work going on in the services, is comprehensive and makes firm recommendations which my fellow Chiefs of Staff will find very useful in harnessing appropriate public recognition and understanding of what we do."
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