President Bush has signed a bill creating a Department of Homeland Security, which will allow greater internet surveillance and beef up the US's computer databases.
The Homeland Security Bill allocates $500m (£321m) for research into new security technologies.
It will also create new computer crimes with stiffer penalties and permit internet service providers to hand more information about subscribers to police.
During the signing ceremony, Bush said the department would gather and focus all the country's efforts to explore technologies for fighting terrorism both off and online.
"This department will be charged with encouraging research on new technologies that can detect these threats in time to prevent an attack," he said.
White House spokesman Ari Fleischer said that it would take "a couple of years" to integrate the 22 existing federal agencies that will make up the new department and to deal with culture clashes and incompatible computer systems.
Civil liberties groups, however, have expressed concern about the impact the law will have on privacy.
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