Animal charities, vets and union leaders have welcomed moves to make it compulsory for all dogs in England to be microchipped.
The Government said the idea would help reunite owners with lost or stolen pets as well as improving the welfare of dogs.
Ministers also announced plans to extend legal protection over dog attacks to cover incidents on private property. The change will be a boost for postmen and women, health visitors and others who call at private addresses but have not been covered by the law if they are bitten by a dog.
Environment Secretary Owen Paterson said: "It's ludicrous that in a nation of dog lovers, thousands of dogs are roaming the streets or stuck in kennels because the owner cannot be tracked down.
"I am determined to put an end to this and ease the pressure on charities and councils to find new homes for these dogs. Microchipping is a simple solution that gives peace of mind to owners. It makes it easier to get their pet back if it strays and easier to trace if it is stolen. The generous support of Dogs Trust will mean that this valuable service can be offered for free to pet owners across the country."
Around 110,000 stray dogs are picked up by police, local authorities and animal welfare charities each year, with around half unable to be reunited with their owner because they cannot be identified. Around 6,000 dogs are put down each year while strays cost the taxpayer and welfare charities £57 million a year.
Thousands of postal workers and hundreds of telecoms engineers are attacked by dogs every year, mainly on private property such as gardens, drives and private roads.
The RSPCA gave a cautious welcome to the news but warned more preventative measures were needed to improve animal welfare. David Bowles, head of public affairs, said: "Compulsory microchipping and extending the law to cover private property as well as public spaces is a welcome move. However, on their own we don't believe they will make owners more responsible or ensure fewer dogs bite people or other animals."
Billy Hayes, general secretary of the Communication Workers Union, said: "Extending the law to private property will bring protection to hundreds of thousands of people who work on private land, such as postal workers and telecom engineers, who were previously left with little recourse in law if they suffered a dog attack."
The Royal Mail said more than 3,000 postmen and women were attacked by dogs in the year to last April. Sir Gordon Langley, who led an inquiry into dog attacks for Royal Mail, said: "The extent and frequency of attacks on postal workers is a matter of considerable concern. The inadequacies of the present law are apparent and these changes whilst long overdue are very welcome."