Opposition figures accused the government of seeking to use the proposed law, which they say is too broad in scope, to criminalize opposition to President Paul Biya's 32-year rule.
Boko Haram fighters have made repeated incursions into the rugged Far North region of Cameroon in recent months. They have clashed with Cameroonian soldiers sent to the border to stop them and are blamed for dozens of deaths and kidnappings there.
Cameroonian officials also fear the Islamist group is targeting young men in the impoverished north for recruitment.
"The draft law provides the ultimate penalty, the death penalty, for anyone who personally, in complicity or under coercion commits a terrorist act," Parliament Speaker Cavaye Yeguie Djibril said.
Though Cameroon has not carried out an execution since 1997, according to Amnesty International, the bill received loud applause from some members of parliament when it was introduced on Tuesday.
But some in the opposition see it as an attempt by the president to tighten his grip on power.
"This text seems obviously to be his response to the popular uprisings that have led to the fall of regimes in several African countries and in particular Burkina Faso," said Maurice Kamto, a former deputy justice minister turned opposition figure.
Hundreds of thousands of protesters poured into the streets in Burkina Faso in October, forcing President Blaise Compaore to step down and flee the country after 27 years in power.
Cameroon has reinforced its military presence on its northeastern border as part of regional efforts to combat Boko Haram. This week it announced it had trained a special commando unit of around 850 soldiers to fight the militants.
Cameroon also faces growing insecurity along its eastern border with Central African Republic.
(Additional reporting by Bate Felix; Writing by Joe Bavier; Editing by Angus MacSwan)
