David Cameron set out his vision for "moral capitalism" in a major speech on the economy on Thursday.
He suggested transparency to help stem the worst excesses in business as well measures that will make it easier for co-operatives to be created.
The prime minister announced legislation affecting the 12 million co-op users in the UK would be streamlined into a new co-operatives bill.
"We won’t build a better economy by turning our back on the free market, we’ll do it by making sure that the market is fair as well as free," he said.
"While of course there is a role for government, for regulation and intervention, the real solution is more enterprise, competition and innovation."
The address builds on ideas Cameron set out three years ago in a speech to the world economic forum in Davos, Switzerland, when he said governments must "stand up to business when the things that people value are at risk".
It comes as against a backdrop of continued unrest over city regulation and bonuses.
On Wednesday Wall Street banking giant Goldman Sachs, which employs around 5,300 staff in the UK, announced a bill for pay and bonuses in 2011 of £7.95bn, despite posting a 47% drop in earnings for the last year.
The revelation came as The City of London Corporation won its High Court bid to evict anti-capitalist protesters from outside St Paul's Cathedral.
Lawyers for Occupy London argued the case raised an issue of "extreme public importance" but Mr Justice Lindblom granted orders for possession and injunctions against the group.
Instilling an ethical streak in big business has become a key battleground for all three main parties in Westminster.
Ed Miliband used his Labour Party conference speech last year to pledge he would tackle "predatory" companies that made unfair excessive profits.
On Wednesday Miliband said he would judge Cameron on "deeds" not his speeches.
"I welcome the fact that other leaders are coming onto the ground that I set out in my Labour Party conference speech about the need to tackle predatory capitalism."
Earlier this week Liberal Democrat leader Nick Clegg unveiled his plans to create a "John Lewis economy" by radically increasing employee share ownership, and research by Forrester showed that the co-operative bank was most trusted by European consumers.
The deputy prime minister said that employee-owned firms tended to perform better, which would help boost growth, and insisted the move would also help usher in a new era of "responsible" capitalism.
Fellow Lib Dem Vince Cable is attempting to crack down on fat-cat salaries, urging bank bosses to show restraint in upcoming pay deals.