The move comes after governments and regulators from Europe to Asia have condemned and some have opened inquiries into sexualised content on the app.
xAI, the startup behind Grok, said on Thursday it was restricting image generation and editing to paying subscribers as it tried to fix safeguard lapses that had allowed sexualised outputs including depictions of scantily clad children.
"The government views the practice of non-consensual sexual deepfakes as a serious violation of human rights, dignity, and the security of citizens in the digital space," Communications and Digital Minister Meutya Hafid said in a statement.
The ministry has also summoned X officials to discuss the matter.
Musk said on X that anyone using Grok to make illegal content would suffer the same consequences as if they had uploaded illegal content.
xAI replied to Reuters' email seeking comment with what seemed to be an automated response: "Legacy Media Lies". X did not immediately respond to a request for comment.
Indonesia, with the world's biggest Muslim population, has strict rules that ban the sharing online of content deemed obscene.