The Education and Skills Bill, which has been heavily publicised by the Government, will require all 17-year-olds to be in some form of education or training by 2013, with the law being extended to 18-year-olds by 2017.
Ministers say new laws are needed to help tackle the problem of 200,000 teenagers who are "Neet" - not in education, employment or training.
Options for young people will include staying on in school or college, taking up apprenticeships or doing day-release training from a job.
Ed Balls, the Children, Schools and Families Secretary, has said he wants the age raised so that young people will be better qualified for jobs demanding high skill levels. He believes it will help to close the achievement gap between the rich and poor, as children from disadvantaged families are more likely to leave school at 16.
Controversially, Mr Balls has spoken in favour of on-the-spot fines or court action for young people who refuse to participate in education or training.
Teaching unions and businesses have been generally supportive of the bill. However, the General Teaching Council for England has been critical, calling it counterproductive, as have opposition parties.
Michael Gove, the Conservatives' education spokesman, said it would lead to more disruptive pupils in schools.
Mr Balls has denied this, saying he expects the numbers of over-16s staying on in school to remain roughly the same. The increased places will be in colleges, apprenticeships and work-based training.