The city of Hangzhou will carry out the work in April as it seeks to revive the 2,000-year-old city's original look, focusing on 10 outstanding scenic areas.
China applied in 1996 to have the area around the lake listed as a Unesco World Heritage site, a highly coveted status that can be a major boon to tourism.
Unesco requires that historic sites be kept intact, although exact terms and specifications vary greatly depending on the condition of the site in question.
The official China Daily newspaper said all buildings over 79ft (24 metres) tall on the lake's eastern shore would have to be shortened. It didn't say by how much or mention the number of buildings affected.
The government notice also gave few details about the plan but said it would require taking floors off lakeside complexes including the famed Shangri-La Hotel, where suites cost tens of thousands of pounds per night.
A spokeswoman for the 382-room hotel said by phone that the city government had yet to notify the hotel of its plans.
"We haven't received any order or any notice about it. But we're also very concerned and will pay close attention to this," said the woman, who gave only her surname, Fan.
Calls to other structures mentioned in the notice, including the Huabei Hotel and a television tower, were not answered. Calls to the city spokesman and tourism bureau also rang unanswered.