Individuals or groups who help migrants not entitled to protection to submit requests for asylum or who help illegal migrants to gain status to stay in Hungary will be liable to jail under a new bill submitted to parliament.
The legislation is part of Prime Minister Viktor Orban government's campaign against George Soros, a Hungarian-born US financier known for funding liberal causes.
The text of the legislation, known as the "Stop Soros" bill, which was posted on parliament's official website said: "Those who provide financial means ... or conduct this organizational activity on a regular basis will be punishable with up to one year in prison."
"We need an action plan to defend Hungary and this is the Stop Soros package of bills," the interior ministry said in the legislation.
It said there were international and also Hungarian organisations helping the entry of illegal migrants to Hungary and "sanctioning these is justified". It did not name any groups.
In power since 2010, Mr Orban has increased his control over the media and has campaigned on a platform of fierce hostility to immigration for years.
The policies have put him at odds with the European Union, which funds Hungary with billions of euros a year.
Mr Soros was publicly vilified during Mr Orban's campaign for April elections which Mr Orban won in a landslide, securing a third straight term in office.
His anti-immigration stance is particularly popular with voters in rural Hungary.
He has accused Mr Soros and the NGOs funding him of plotting to undermine Hungary's Christian culture by flooding it with immigrants, an allegation that Mr Soros has repeatedly denied.
The UN refugee agency has urged Hungary to scrap the draft law, saying it would deprive refugees and asylum-seekers of vital services and push "rising xenophobic attitudes".