Protests began on Monday over what demonstrators called excessive pay and housing allowances for parliamentarians.
The unrest escalated into riots on Friday after a motorcycle rideshare driver was killed during police action at a protest site.
Homes of political party members and state buildings were ransacked or set ablaze, sparking widespread concern.
Prabowo, speaking at a news conference on Sunday at the Presidential Palace and flanked by the leaders of various political parties, said he had ordered the military and police to take stern action against rioters and looters, warning that some of the actions were indicative of "terrorism" and "treason".
"Leaders in parliament have conveyed that they will revoke a number of parliament policies, including the size of allowances for members of parliament and a moratorium on overseas work trips," Prabowo said.
"To the police and the military, I have ordered them to take action as firm as possible against the destruction of public facilities, looting at homes of individuals and economic centres, according to the laws."
The protests represent the most significant challenge to Prabowo's government, which has faced little political opposition since taking office almost a year ago.
Prabowo, who cancelled a high-profile trip to China due to the unrest, on Sunday met with political party leaders and key members of his cabinet at the Presidential Palace to discuss the situation.
Many ministers and political leaders arriving at the palace used civilian number plates instead of special ones given to officials, a witness said, in an apparent precaution against public anger.
The military was deployed to guard the palace, government installations and key ministers' homes.
It remains unclear who is behind the rioting and looting that followed the protests, initially organised by student associations.
Muzammil Ihsan, head of the All Indonesian Students' Executives Body, the country's largest student umbrella group, told Reuters cutting MPs' perks was "not enough" and said further demonstrations were being "considered".
"The government must resolve deep-rooted problems. The anger on the streets is not without cause," Ihsan said.
Tegar Afriansyah, the chairman of a smaller student group, Indonesian Student League for Democracy, which has been protesting since Monday, told Reuters the announcement did not address the root of the problem, which was "political oligarchy and an unequal economic structure".
He termed Prabowo's instructions to police and military as "clearly repressive and intimidating".
Global rights watchdog Amnesty International's Indonesia chapter termed Prabowo's use of terms such as treason and terrorism as "excessive".
TikTok, owned by China's ByteDance, said it had suspended its live feature in Indonesia for a few days.
The death toll rose to five on Sunday, according to the local disaster management agency in Makassar, South Sulawesi province.
The agency confirmed an online motorcycle taxi driver was beaten to death by a mob that accused him of being an intelligence agent.
Three others were killed in an arson attack on the local parliament building on Friday.
