Most youngsters will not take traditional exams until they are 18, with most grades awarded on the strength of teacher assessment.
The Westminster Government's 18-month Tomlinson review of secondary education, which is proposing the move, is also to push for changes to school league tables in England - long since abolished in Wales.
Under the proposals, GCSEs and A-levels will be replaced by a four-level diploma qualification by 2014. The most advanced level, an A-level equivalent, will be assessed mainly by external exams. But lower levels, including the intermediate diploma which will be taken by 16-year-olds, will predominantly be graded by teachers based on pupils' work during a course.
Wales is into the second year of piloting its own baccalaureate for 18-year-olds, which includes A-level and equivalent qualifications. ACCAC, the Welsh qualifications, curriculum and assessment authority, has recommended extending the bac to cover the full 14-19 age range and academic ability.
But its curriculum review has come out in favour of retaining GCSEs, albeit subject to revision of their content and format.
The report on diplomas, produced by a working group led by Mike Tomlinson, the former chief inspector of schools in England, will also propose:
* training and accrediting teachers to become chartered examiners to oversee teacher assessment in schools;
* compulsory courses in functional maths, English and IT;
* scrapping formal coursework in many subjects;
* incorporating advanced extension awards and a compulsory project into A-levels, which would have new A* and A** grades;
* cutting A-level modules from six to four.