The system is intended to allow the security services to detect disturbances and potential problems more easily, but will not use facial recognition technology, the bill says.
The technology could be particularly useful during the highly ambitious open-air opening ceremony with Olympians sailing down the river Seine in front of a crowd of 600,000 people.
French police and sports authorities faced severe criticism in May after shambolic scenes during the Champions League final in Paris when football fans were caught in a crowd crush and teargassed.
The draft law, which was presented to the cabinet on Thursday, proposes other security measures including the use of full-body scanners and increases the sentences for hooliganism.
Organizers and Interior Minister Gerald Darmanin have both argued in favour of using so-called "intelligent" security camera software that scans images for suspect or dangerous behavior.
The use of such a system during the Olympics is an "experimentation", the draft law says, but could be applied for future public events which face terrorism-related or crowd control risks.
"No biometric data is used, nor facial recognition technology and it does not enable any link or interconnection or automatic flagging with any other personal data system," the bill states.
The games' organizing committee said on November 21 that it needed to lift its budget estimate by 10 per cent from 3.98 billion euros to 4.48bn euros, partly as a result of inflation.
Rather than opening the games in an athletics stadium as is customary, organizers have planned a ceremony on July 26, 2024 with a flotilla of some 200 boats sailing down the river Seine.
The banks of the river can accommodate 100,000 people who will have to buy tickets, while another 500,000 are set to watch for free from the street level, according to government estimates.
The draft law is expected to be debated in parliament in January where the minority government of President Emmanuel Macron will need support from opposition groups to pass it.