19 October 2014Last updated at 04:38 ET
He told the Mail on Sunday quadrupling the current maximum six-month term showed his determination to "take a stand against a baying cyber-mob".
The plan has been announced days after TV presenter Chloe Madeley suffered online abuse, which Mr Grayling described as "crude and degrading".
Magistrates could pass serious cases on to crown courts under the new measures.
Social media 'venom' Mr Grayling told the newspaper: "These internet trolls are cowards who are poisoning our national life.
"No-one would permit such venom in person, so there should be no place for it on social media. That is why we are determined to quadruple the current six-month sentence."
Miss Madeley received threats after defending her mother Judy Finnigan's comments on a rape committed by footballer Ched Evans, which she said was "non-violent" and did not cause "bodily harm".
Richard Madeley has said "prosecution awaits" those who sent "sick rape threats" to his daughter.
The justice secretary said: "As the terrible case of Chloe Madeley showed last week, people are being abused online in the most crude and degrading fashion.
"This is a law to combat cruelty - and marks our determination to take a stand against a baying cyber-mob.
"We must send out a clear message - if you troll you risk being behind bars for two years."
'Online terrorism'
Internet trolls face up to two years in jail under new laws
Internet trolls could face up to two years in jail under new laws, Justice Secretary Chris Grayling has said.
The plan has been announced days after TV presenter Chloe Madeley suffered online abuse, which Mr Grayling described as "crude and degrading".
Magistrates could pass serious cases on to crown courts under the new measures.
Social media 'venom' Mr Grayling told the newspaper: "These internet trolls are cowards who are poisoning our national life.
"No-one would permit such venom in person, so there should be no place for it on social media. That is why we are determined to quadruple the current six-month sentence."
Miss Madeley received threats after defending her mother Judy Finnigan's comments on a rape committed by footballer Ched Evans, which she said was "non-violent" and did not cause "bodily harm".
Richard Madeley has said "prosecution awaits" those who sent "sick rape threats" to his daughter.
The justice secretary said: "As the terrible case of Chloe Madeley showed last week, people are being abused online in the most crude and degrading fashion.
"This is a law to combat cruelty - and marks our determination to take a stand against a baying cyber-mob.
"We must send out a clear message - if you troll you risk being behind bars for two years."
'Online terrorism'
Miss Madeley told the Mail on Sunday she agreed with the proposals to update the 10-year-old law.
"It needs to be accepted that physical threats should not fall under the freedom of speech umbrella," she said.
Claire Hardaker, an academic from Lancaster University who studies online aggression, said proving the intent of a threat on the internet was difficult for police.
"It's like your mum sending you a text saying 'I'm going to kill you' because maybe you forgot to bring something that she asked you to bring, versus somebody on the internet saying 'I'm going to kill you'," she said.
"You have to know the intent of the two different people and to know the intent of the stranger on the internet you've got to be able to read their mind.
"Proving intent, proving that they really meant it, that they had the means to carry it out, it's very difficult."
Law change Former Conservative MP Edwina Currie, who has experienced online abuse, said people should learn to show restraint when making online comments.
"Most people know the difference between saying something nice and saying something nasty, saying something to support, which is wonderful when you get that on Twitter, and saying something to wound which is very cruel and very offensive.
"Most people know the difference - I don't think education is the issue. I think making sure society takes a dim view of the latter is exactly the right thing to do."
Those who subject others to sexually offensive, verbally abusive or threatening material online are currently prosecuted in magistrates' courts under the Malicious Communications Act, with a maximum prison sentence of six months.
Under the act, it is an offence to send another person a letter or electronic communication that contains an indecent or grossly offensive message, a threat or information which is false and known or believed by the sender to be false.
More serious cases could go to crown court under the proposals, where the maximum sentence would be extended.
The law change is to be made as an amendment to the Criminal Justice and Courts Bill going through Parliament.
The new measures would also give police more time to collect enough evidence to enable successful prosecutions to be brought.
Mr Grayling announced earlier this month that the bill would also have an amendment dealing with so-called "revenge porn", with those posting such images on the internet facing two years in jail.
"It needs to be accepted that physical threats should not fall under the freedom of speech umbrella," she said.
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Edwina Currie Former Tory MP"Most people know the difference between saying something nice and saying something nasty”
"It should be seen as online terrorism and it should be illegal."
"It's like your mum sending you a text saying 'I'm going to kill you' because maybe you forgot to bring something that she asked you to bring, versus somebody on the internet saying 'I'm going to kill you'," she said.
"You have to know the intent of the two different people and to know the intent of the stranger on the internet you've got to be able to read their mind.
"Proving intent, proving that they really meant it, that they had the means to carry it out, it's very difficult."
Law change Former Conservative MP Edwina Currie, who has experienced online abuse, said people should learn to show restraint when making online comments.
"Most people know the difference between saying something nice and saying something nasty, saying something to support, which is wonderful when you get that on Twitter, and saying something to wound which is very cruel and very offensive.
"Most people know the difference - I don't think education is the issue. I think making sure society takes a dim view of the latter is exactly the right thing to do."
Those who subject others to sexually offensive, verbally abusive or threatening material online are currently prosecuted in magistrates' courts under the Malicious Communications Act, with a maximum prison sentence of six months.
Under the act, it is an offence to send another person a letter or electronic communication that contains an indecent or grossly offensive message, a threat or information which is false and known or believed by the sender to be false.
More serious cases could go to crown court under the proposals, where the maximum sentence would be extended.
The law change is to be made as an amendment to the Criminal Justice and Courts Bill going through Parliament.
The new measures would also give police more time to collect enough evidence to enable successful prosecutions to be brought.
Mr Grayling announced earlier this month that the bill would also have an amendment dealing with so-called "revenge porn", with those posting such images on the internet facing two years in jail.
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