Announcing the move, crime prevention minister Norman Baker said he hoped to send a message the drug is harmful, but at the same time raised questions over the efficacy of the classification system to limit drug use.
Ketamine, also known as Special K, will be reclassified from Class C amid mounting evidence over its physical and psychological dangers.
Government drug advisers have seen evidence of users as young as 20 having their bladders removed due to heavy use of the drug.
Reclassification will mean the maximum penalty for unlawful possession of ketamine will increase. But Mr Baker said: "I'm not sure in the very long term the present system is a perfect one for drug control."
Earlier, a report warned users of legal highs they are "dancing in a minefield" after a huge surge in the number of deaths linked to the substances.
The number of UK cases in which novel psychoactive substances - otherwise known as legal highs - were identified as the cause of death rose from 10 in 2009 to 68 in 2012, according to the National Programme on Substance Abuse Deaths.
Clydebank teenager Regane MacColl, who died in a suspected drug incident on February 1, will be laid to rest today. The 17-year-old's death followed a night out at the Arches club in Glasgow and has been linked to the "mortal kombat" ecstasy pills.
Four other users were hospitalised in suspected mortal kombat incidents. The three men (two aged 18 and one aged 26) and a 19-year-old woman have since been discharged.