Waugh is part of the Marylebone Cricket Club (MCC) World Cricket Committee that has been meeting in Perth this week to come up with a number of recommendations it will pass on to the International Cricket Council (ICC).
The proposals also include legalising and regulating betting in India and calling for television replays to be scrapped for low catches.
Waugh is part of a new MCC working party, also including West Indies legend Courtney Walsh, formed this week to look at ways to remove corruption from the game.
Speaking on the eve of the crucial third Ashes Test between England and Australia at the WACA ground, Waugh said it was crucial for the future of cricket that corruption was stamped out.
"The greatest issue facing the game right now is match-fixing," he said.
"Yesterday we threw some ideas around and the lie detector test came from me. I was thinking about how we make players more accountable for their actions.
These suggestions have come in the wake of former Pakistan captain Salman Butt and seamers Muhammad Asif and Muhammad Amir who were charged under the ICC's anti-corruption code in relation to allegations of spot-fixing during the fourth Test against England at Lord's in August.
The trio were provisionally suspended ahead of a hearing by an independent tribunal in Doha due to take place between January 6-11.
"If you have done nothing wrong, why wouldn't you want to do a lie detector test to say you have done nothing wrong? Why wouldn't you take it if you have nothing to hide?" Waugh said.
Waugh admitted the tests couldn't be made compulsory and also conceded the suggestion was unlikely to garner the support of the ICC but hoped the ICC anti-corruption commission would take their initiatives on board.
England captain Andrew Strauss said he was happy with the intent of Waugh's suggestion but admitted he would need more information to make a definitive decision on its merits.
"What I do know is that we don't want the whiff of anything suspicious going on in the game," he said. "We've seen how disruptive it is and how detrimental it is.
"If we have to take extreme measures in order to be 100 per cent confident games are being played in the right spirit, I'd be happy to do it.
"The principle of supporters being certain we are playing the game for the right reasons is a good thing."
The committee also recommended that on-field umpires be asked to make the initial decision on low catches.
If the batsman or fielding captain wished to challenge the umpire's decision, it would only be overturned by conclusive evidence.
Waugh and former England captain Mike Brearley both said they were also disappointed India refused to join the rest of the cricket world in embracing the Umpire Decision Review System (UDRS).
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