The package, which still requires parliamentary approval, covers Tornado reconnaissance jets, a naval frigate and up to 1,200 troops following a request from France in the wake of deadly attacks in Paris last month.
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"The German contribution serves the fight against terrorism under the auspices of the alliance against IS and is aimed at supporting in particular France, Iraq and the international alliance in its fight against IS," according to a copy of the mandate obtained by AFP.
The mandate is for one year at a cost of 134 million euros ($142 million) and can be extended next year.
By providing for up to 1,200 soldiers for aerial reconnaissance and support, it would be the largest Bundeswehr mission, following a drawdown in Afghanistan.
Foreign Minister Frank-Walter Steinmeier acknowledged ahead of the cabinet vote that it could be a protracted fight.
"We are doing what is militarily necessary, what we can do best, and what we can back politically," Steinmeier told the daily Bild.
"We need patience against an enemy like IS."
No date has been set for the parliamentary vote but approval is considered virtually guaranteed as Chancellor Angela Merkel's "grand coalition" government has an overwhelming majority.
Germany is to send an unspecified number of Tornado aircraft fitted with surveillance technology that can take high-resolution photos and infrared images, even at night and in bad weather, and transmit them in real time to ground stations.
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A German frigate could help protect the French aircraft carrier Charles de Gaulle in the eastern Mediterranean, from which fighter jets are carrying out bombing runs, and the tanker aircraft could refuel them mid-air to extend their range, Defence Minister Ursula von der Leyen said last week.
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