Minister of foreign affairs and trade Péter Szijjártó said this afternoon that the government was planning "preparatory work" for the fence, newswires are reporting.
The country this morning declared a state of emergency, and said it was planning to send troops to man border controls as it attempts to stop the vast numbers of refugees travelling through the country.
Government spokesman Zoltan Kovacs said the decision to call a state of emergency was made at Tuesday’s cabinet meeting.
The measure also paves the way for the deployment of the army to assist police with border patrol and migrant-related duties — pending approval from parliament, which is expected next week.
Austria is also sending troops to their borders to deal with the growing crisis, the country's Chancellor Werner Faymann announced this morning.
The decision follows the closure of two of Hungary's seven borders this morning, hours after wire fences were put up around a key border crossing, along a railroad track that had been a main entry point for migrants.
The new laws, which came into effect at midnight tonight, allow police to arrest anyone trying to breach the four-metre fence that runs along part of the 110-mile border with Serbia. Police can also send back any asylum seekers.
Reuters reported that "crowds of migrants" were already building up around the border, which they are no longer able to cross.
Already nine Syrians and seven Afghans have already been detained by police and face possible imprisonment on suspicion of breaching the fence, Reuters claimed.
Most of the thousands of people entering the country are travelling through to western Europe, but the country is struggling with the numbers. So far an estimated 200,000 people have reached Hungary.
Yesterday a record 9,380 people passed the border - significantly up on the previous record of 5,809, which was set just a day earlier, according to AP.
Hungary is one of a handful of European Union countries imposing border controls, after Germany made the surprise decision to close its borders at the weekend, throwing the future of the Schengen Agreement into question. Austria has also followed suit.
The European Commission has said that the current situation in Germany “appears to be a situation covered by the rules”, indicating that Article 23 of the Schengen treaty allows for the temporary reintroduction of border controls “where there is a serious threat to public policy or internal security”.
But some experts have warned that Germany’s example, and the domino effect it has created across the continent, could threaten the viability of Schengen in the future.