The government has decided to contribute CHF100 million ($98 million) over the next four years towards a special programme by Swiss universities to boost the number of certified medical doctors.
The aim is to increase the number of new diplomas to 1,300 annually by 2025.
Interior Minister Alain Berset, who also holds the health portfolio, told a news conference that Swiss universities could cover only about 30% of the current demand.
He acknowledged it would take time to limit the reliance on overseas doctors.
Berset said the authorities would try to give incentives for students to specialise in family medicine but no formal conditions would be set to tackle a shortage of family doctors.
Doctors recruited from abroad, in particular from neighbouring Germany, make up more than 60% of doctors in Switzerland, but there is a broad political consensus to increase the number of medical students graduating from Swiss universities.
Parliament will discuss the proposal as part of a bill on research and innovation.
Education Minister Johann Schneider-Ammann added that the public funds were meant to help launch further programmes.
The cabinet also agreed to continue efforts to train health staff in Switzerland, creating additional opportunities for apprenticeships and internships for nurses and other care workers.
Schneider-Ammann welcomed an increase in the number of diplomas for health professions handed out in Switzerland since 2007, partly due to a common strategy introduced five years ago between the national and cantonal authorities as well as associations in the health sector.
Urs Geiser, swissinfo.ch