The centre-right GERB party, which won general elections last July, has said a relaxation of the ban will avoid hurting the tourist industry during tough economic times.
Under the changes, restaurants and cafes smaller than 50 square metres (540 sq ft) in size may decide whether to allow smoking, while larger establishments will be required to designate separate non-smoking halls.
Smoking will be completely forbidden in public transport, hospitals, schools, universities, cinemas and theatres.
Last year, the Croatian government was forced to ease a smoking ban after only four months because café owners complained it was crippling business.
Bulgaria has the second highest percentage of smokers in the European Union after Greece. Almost every third person between 10 and 19 years of age is a regular smoker, data from the health ministry show.
Tourism accounts for 8% of GDP in the Balkan country of 7.6 million people, the EU's poorest state.
The European Parliament has consistently pushed for a total ban on smoking in the workplace (EurActiv 25/10/07), while the European Commission has indicated that it wants to harmonise minimum taxes on tobacco products in a bid to cut down on smuggling (EurActiv 17/07/08).
(EurActiv with Reuters.)