In the latest consultation paper, the party's education working group favours a significant shift in policy on the private sector.
The paper suggests that money from the Assisted Places Scheme could be used to buy sport or music bursaries in independent schools.
Until now, the Liberal Democrats have been committed to abolishing assisted places which costs public funds around Pounds 100 million a year. Labour is pledged to get rid of the scheme and use the money to cut class sizes in infant schools.
However, the consultation paper puts forward two options for reform of the scheme. There could be either a national scheme with local education authorities applying for an allocation or a more local scheme, with education authorities maintaining a fund to buy places.
The Liberal Democrats suggest local authorities could determine their own policy on the awarding of bursaries. They might be available for pupils with special needs, such as mental or physical handicaps or learning difficulties.
Other bursaries might be awarded for exceptional talent in areas such as languages, technology or science.
Independent schools would be required to follow the national curriculum, although under the Liberal Democrats' policy that would take up a smaller proportion of school time than currently.
The schools would also be regularly inspected under the supervision of the Office for Standards in Education.
The various measures are intended to encourage a partnership between the independent sector and the state schools. Local authorities would be encouraged to sell services to public schools and would be able to purchase use of the independent schools' facilities.
More radically, local authorities might consider buying places at independent schools rather than building a new school or replacing an old one.
Around 180 independent schools already have children on roll paid for by their local authorities. All the places in Sandbach public school in Cheshire, for example, are paid for by the local authority.
The working group which produced the paper estimates that the charitable status of independent schools saves them Pounds 41.43 million a year and it suggests all local authority schools be given the same benefit. Such a change would require all schools to negotiate sponsorship and financial support from their local communities.
The proposals are to be debated at the Liberal Democrats' spring conference in Nottingham.
Decisions on the party's election manifesto will be taken at the autumn conference.