Monday's regular Cabinet meeting approved the Digital University Act draft in principle.
"It'll be a public university," Cabinet Secretary Muhammad Musharraf Hossain Bhuiyan said.
"However, the law mentions a few additional things as it is to be a specialised university."
"The university will be named after Bangabandhu Sheikh Mujibur Rahman," Bhuiyan said.
This will require approval from the Bangabandhu Trust. He said the matter will be dealt with while finalising the law.
Bhuiyan says the university plans to draw teachers from home and abroad with attractive salary and allowance structure.
It will provide distance and online education. Two ICT entrepreneurs, nominated by the vice chancellor, will be on the academic council as well.
Prime Minister Sheikh Hasina on Sunday criticised the mushrooming of private universities, saying their educational quality had declined.