BBC News Asia
Mr O'Neill said the move was aimed at cutting costs but also ensuring officials stayed focused on their work.
Investigations had shown travel funds had been abused for trips which brought "very little or no benefit", he said. Any official travelling without his permission could face dismissal.
Mr O'Neill said the government expected to save about K40 million through the travel ban, which is already in effect.
He said the government had to "stay focused this year, keep our feet on the ground, cut down on unnecessary travels and meetings and conferences that yield little results.
"We have investigated and established that funds budgeted for essential goods and services have been abused to pay for overseas junkets, meetings and conferences that bring very little or no benefit to anyone," he said, adding that productivity was "seriously affected by unnecessary trips".
Officials and government bodies now have to seek the prime minister's personal approval for foreign travel, while permission must also be sought to hold international events within Papua New Guinea.
"Those who breach this decision and directive will face stiff penalties, including suspension or dismissal," the prime minister said.
Last year Transparency International ranked PNG as the 150th most corrupt country in the world out of 176 surveyed.