The ruling in June by a district court in Cologne outraged Muslims and Jews and sparked an emotional debate in the country, leaving an embarrassed government to promise legislation by the autumn protecting the right to circumcise.
Although the ban applied only to the Cologne region, doctors across the country refused to carry out operations because of what they saw as a risk of legal action.
The outline draft of a new bill states that the operation should take place "with the most effective pain relief possible" and only if parents have been fully informed about the nature of the procedure, a ministry spokesman said.
Generally doctors would carry out circumcisions but if the baby boy is less than six months old than it can also performed by another qualified person, such as a mohel, a Jewish individual specially trained in circumcising.
Sensitivity to charges of intolerance
The ministry's outline bill, a first but critical step towards creating the new law, has been sent to Germany's federal states ahead of a consultation with experts due later this week.
According to the spokesman the outlines were based on parents' constitutional right to bring up their children and decide on all matters concerning them. The state, however, has a responsibility as watchdog to protect a child's wellbeing.
The speed with which national lawmakers agreed in July to pass a new law underscored sensitivity to charges of intolerance in a country haunted by its Nazi past. German Chancellor Angela Merkel said Germany risked becoming a laughing stock if Jews were not allowed to practice their rituals.
About 120,000 Jews are registered as living in Germany along with around 4 million Muslims, many of whom are from Turkey.
The Cologne court, ruling in the case of a Muslim boy who suffered bleeding after circumcision, said the practice inflicted bodily harm and should not be carried out on young boys, although it could be practiced on older males with consent.