Prabowo plans to grant amnesty to those convicted and awaiting trial if they pledge loyalty to the Indonesian state and "stop all activities aimed to separate Papua from Indonesia", senior minister for law and human rights affairs, Yusril Ihza Mahendra, told Reuters.
The government is drawing up lists of individuals eligible, he said. Most armed criminal groups in Papua province are linked to separatist rebels.
"It's going to be a new hope for us in finding a solution in Papua," Yusril added.
A low-level battle for independence has been waged in the resource-rich island of Papua since it was brought under Indonesian control following a disputed referendum overseen by the United Nations in 1969 at the end of Dutch colonial rule.
Many Papuans have said the outcome did not truly reflect local sentiment. Indonesian security forces have since kept a tight rein on the region and have been accused of human rights rights abuses, which they deny.
Separatists have in recent years managed to acquire better weapons, taken in raids on army posts or sourced from the black market. They have also abducted foreigners, including a New Zealand pilot who was released last year after being held for 19 months.
Police last August said another New Zealander was killed by rebels when he landed a helicopter in a remote area.
Prabowo plans to pardon 44,000 prisoners including drug offenders and activists jailed in Papua for criticising the government.
The president has previously said that he might allow people who engaged in graft to go unpunished if they return what they stole. Indonesia is also considering parole for two former leaders of the militant network Jemaah Islamiah and amnesty for its jailed members.
