Tessa Jowell, the culture secretary, has also asked the Crown Prosecution Service to consider taking legal action over online casino and poker advertising that offers incentives to gamble such as doubling the punter's initial stake.
Jowell said action would be taken if advertising continued to cross the line.
She said: "It's clear that some ads have been breaking the existing law.
"I am not willing to turn a blind eye to this and have agreed with the Gambling Commission that we should crack down on advertisers and publishers who knowingly break the law. We will issue them with new guidance and I am putting them on notice that we won't hesitate to ask the Crown Prosecution Service to act."
Internet casino and poker rooms currently operate offshore but the Gambling Act 2005, approved by Parliament in April, will enable them to operate from the UK for the first time. From September 2007, online gamblers will have access to a properly regulated British online casino industry with safeguards for children and the vulnerable.
The Department of Culture, Media and Sport warned that the Act provided the secretary of state with powers to restrict future gambling advertising, should self-regulation by the ad industry prove insufficient. It stressed that the crackdown under existing legislation is not about trying to catch out operators who are acting in good faith, but about stopping companies that deliberately flout the law.
Offenders could face a fine of up to £5,000 and/or up to two years in prison.
Jowell announced plans to strengthen the board of the Gambling Commission by appointing at least one more member with expertise in social responsibility following talks with Peter Dean, its chairman. She said the body had assumed new responsibilities in this area.
The regulator was set up under the Gambling Act and the move reflects the Government's concern that liberalising the gaming laws should not harm children and vulnerable adults.
If you have an opinion on this or any other issue raised on Brand Republic, join the debate in the Forum.