The plans are similar to rules introduced in France this year, whereby the Government will withdraw internet access from people who have been found downloading content illegally three times.
Speaking at the Government-convened C&binet conference into the creative industries, Mandelson, First Secretary of State, Secretary of State for Business, Innovation and Skills and Lord President of the Council, said the Government's approach will be to introduce a "stable, consistent and predictable framework of public policy".
Mandelson said three strikes is "a reasonable way of describing [the Government's] approach" and there will be "certainly two notifications".
He said: "We have to get this right and develop a range of measures and we want to consult people on that. We need to take into account different views, as well as the sort of notifications we would envisage."
Under the plans, the cost of the regime's enforcement will be shared between content rights holders and ISPs. But Mandelson said "there has to be a threshold; you can't put that sort of burden on small start-up ISPs".
He said "there is no economy on earth in which the creative industries plays such an important part" as in UK and the "creative challenge is to deliver a business [model] for the next 50 years".
The plans announced today form part of the Government's ongoing bid to improve the health of the creative economy.
Among various aims, C&binet is looking at improving access to finance for creative industries and establishing new business models for online content.
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