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At a security conference in Munich, he argued the UK needed a stronger national identity to prevent people turning to all kinds of extremism.
He also signalled a tougher stance on groups promoting Islamist extremism.
The speech angered some Muslim groups, while others queried its timing amid an English Defence League rally in the UK.
As Mr Cameron outlined his vision, he suggested there would be greater scrutiny of some Muslim groups which get public money but do little to tackle extremism.
Ministers should refuse to share platforms or engage with such groups, which should be denied access to public funds and barred from spreading their message in universities and prisons, he argued.
"Frankly, we need a lot less of the passive tolerance of recent years and much more active, muscular liberalism," the prime minister said.
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