The reforms would provide high quality on-the-job training leading to a recognised qualification. They may also tackle the problem of the more than 200,000 disaffected 18 to 20-year-olds without qualifications, a job or training place.
The plan is one of the key recommendations from Sir Ron, chairman of the School Curriculum and Assessment Authority, who was asked to conduct a 16-19 review by Gillian Shephard, the Education and Employment Secretary.
The proposal would throw a lifeline to the ailing modern apprenticeship scheme which has failed to attract the numbers expected by Government. The scheme, which is run by employers, caters for just 15,000 youngsters, well short of this summer's target of 60,000.
Leaders of training and enterprise councils, which are responsible for youth training, said this week Sir Ron's proposal would play a key role in cutting the high number of 18-year-old drop-outs.
A report from the TEC national council, leaked to The TES, shows that 227,000 18 to 20-year-olds - one in eight - are not in education, work, or training. Nearly one in five people unemployed for more than six months are under 20.
Under Sir Ron's plan, young people will learn core skills leading to a recognised qualification. The next step could be traineeships and awards at national, intermediate, advanced, and graduate level to close the gap between youth training and modern apprenticeships.
Modern apprenticeships, launched last year, guarantee students two years of study and work-based training and lead to a qualification. In contrast, youth training offers places for up to two years, but has been heavily criticised because students often leave with nothing to show for all their efforts.
Graham Hoyle, chief executive of Gloucestershire TEC, said: "For all its flaws, there is no question that the term apprenticeship is seen as a quality word, whereas we know that the quality of youth training has never quite escaped the less than favourable perspective it gained in the early years, when it was in many ways a cheap labour scheme."
Sir Ron recommends keeping the three "pathways" to post-16 qualifications - A-levels, general national vocational qualifications and national vocational qualifications. However, he cautiously backs greater flexibility so that students can mix and match units from the three routes. For example, a student doing NVQ photography may benefit from academic studies only available in A-level units.
This thorny question of "credit transfer" which allows students to mix units from different courses is being tackled in higher education, but ministers fear that similar moves for 16 to 19-year-olds will dilute A-level standards.
Sir Ron does not attempt to resolve such issues. He intends to publish a "decision framework" with guidelines for further consultation.
Students' successes in and out of school will be set in a revamped national record of achievement.
The report also suggests giving all exam groups the right to offer all awards. It is unclear, however, whether advanced GNVQs will be renamed applied A-levels.
The proposals attempt to align A-levels, GNVQs and NVQs. All students could receive the same certificate no matter which pathway they had chosen, but it would say whether they had taken GNVQs, A-levels, AS-levels or NVQs.
It is also understood that Sir Ron intends to reform AS-levels so they would become the first year of an A-level course, and, possibly, an applied A-level. A new AS-level in key skills is also being considered.
The GCSE boards are fiercely protective of vocational GCSEs. They told Gillian Shephard at a recent meeting they would fight any proposals to restrict their exam to academic subjects only.