The ban will lead to a reduction of oil demand in China, as the country is now the world's second-largest oil consumer after the US.
Vice-Minister of Industry and Information Technology Xin Guobin said the government was working with other regulators on a timetable to end production and sales.
Xin said the ministry had started research and will look to draw up a timeline with relevant departments.
With an enormous population and industrial output, China's plan to ban fossil fuel vehicle sales in the near future could be game-changing.
Liu Zhijia, assistant general manager at China's largest passenger auto exporter Chery Automobile Company, said, "The implementation of the ban for such a big market like China can be later than 2040".More news: NASA Shares How Hurricanes Irma, Jose & Katia Looked From Space
The rules say at least one fifth of vehicles sold in China by 2025 must be plug-in hybrids or fully electric.
China has done considerably well to make the automobile manufacturers produce and sell new electric vehicles.
The "profound" changes Xin speaks of would certainly be a boon to the Chinese electric vehicle market, which has attracted foreigners like Elon Musk and Warren Buffet.More news: Shahid Afridi feels Indian players would have further strengthened the World XI
Already, electric vehicles (EVs) have experienced a surge in ownership in China with the country's largest EV manufacturer, BYD, shipping nearly 47,000 emission-free cars so far this year. This constituted 43 percent of global electric vehicle production and made China the country with the largest number of electric cars on the road, surpassing the United States.
Xin said the policy would be implemented "in the near future", according to the official Xinhua news agency.
Chinese automaker BYD Auto, a unit of battery maker BYD Ltd., is the world's biggest electric vehicle maker by number of units sold. This has already allured a lot of global companies like Ford, VW, Nissan, etc.to form joint ventures with Chinese carmakers.
Chinese-owned Volvo announced in July that every vehicle it makes from 2019 onward will have an electric motor.More news: Shame Peace Nobel Winner Aung San Suu Kyi To Treat Rohingyas Humanely
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