Top colleges will be given more freedom to expand after the Government responded to fears that school sixth-form growth could harm further education.
About 50 FE and sixth-form colleges with outstanding ratings from inspectors could be eligible for funding to invest in buildings to accommodate more students.
The plans, revealed in a consultation launched on Monday, would match an offer already made for schools without sixth forms to expand in order to provide the new 14 to 19 diplomas.
The Department for Education and Skills said the change is aimed at bringing about "parity" between schools and colleges in the opportunities to expand, with the expectation that the diplomas will increase demand.
Bill Rammell, the further education minister, said: "The new specialised diplomas mark the most significant reforms to secondary education in decades."
Over the next three years, the Government says it will need an extra 50,000 places for 16 to 19-year-olds because of changing demographics and improved exam results. By 2015, it aims to have 90 per cent of 17-year-olds in education or training, compared to 75 per cent now, with increasingly high numbers expected to study the diploma.
School rules have already been relaxed, with a fast-track process to create sixth forms and a presumption that high-performing 11 to 16 schools will always be approved. About 60 school sixth forms are expected to emerge out of these changes.
The DfES expects that 50 colleges will be eligible for capital funding under a similar right for outstanding colleges to expand, as long as they can show they have consulted with the local authority and Learning and Skills Council.
Julian Gravatt, director of funding and development for the Association of Colleges, said: "It looks like good news if there is a system which allows FE colleges to expand when they're good."
The DfES has conceded that colleges may not get the full cost of new buildings and may have to borrow the rest, as they do now.
College debt is about half a billion pounds and is set to double over the next three years, Mr Gravatt said, while colleges take on up to 9,000 unfunded students.