Young offenders institutions should be replaced by neighbourhood "academies" to help cut the number of youths in custody by two thirds, a former chief inspector of prisons said in plans to be launched today.
Most young offenders should stay with relatives or be given accommodation nearby, with only one in three under-18s held on-site at the new academies, which should be within an hour of their home, a report by the Young Offenders Academy Steering Group found.
The study, carried out by a team of experts including Lord Ramsbotham, calls for the centres to provide intensive activities aimed at rehabilitating and educating the offenders as part of Justice Secretary Kenneth Clarke's "rehabilitation revolution".
The proposals would require "longer term investment" and submissions have already been made to prisons minister Crispin Blunt "in response to his inquiries concerning procurement, commissioning, judicial support and local government engagement", the report said.
Lord Ramsbotham said the plans offered "a completely new approach to young people who have been through the courts".
"I call on the Government to pick this up and run with it," he said.
Project director John Plummer added: "We are not developing a 'good prison' but an entirely new approach to the education and development of vulnerable children, all of whom are young offenders and some of whom are also damaged, difficult and dangerous."
Former Tory minister Steven Norris said the key was to "ensure that young people do not enter a life of crime".
"Ken Clarke is committed to cutting crime and reducing the prison population and I know he will find the model of the Young Offenders Academy attractive," he said.
Professor Rod Morgan, the former chairman of the Youth Justice Board, added that the proposed model was "a robust, local, community-based model for reducing the use of custody by effectively addressing the multiple problems young offenders typically have".
"The model deserves to be trialled," he said.
"Unless the public can see that the 'rehabilitation revolution' comprises genuine, safeguarding alternatives to the current custodial model, there is a danger that the Government's bold steps will falter and the initiative will lose momentum."
The cost of a full-scale Young Offenders Academy, complete with a secure unit, would be about £49 million, raising concerns over the amount of funding it would take to provide enough centres to ensure no young criminal would have to travel more than an hour to reach one.
"Initial inquiries have been made about potential sources of funding and could be explored further as soon as ministers indicate a wish to proceed or local authorities submit expressions of interest," the report said.
A Ministry of Justice spokesman said: "The Government's aim is to prevent young people from committing crime and entering the criminal justice system in the first place.
"Where custody is the only option, because of the seriousness of the crime, we are already consulting on proposals to improve rehabilitation, help young people overcome their problems and put an end to their offending behaviour."
Juliet Lyon, director of the Prison Reform Trust, said: "It remains to be seen whether academies can work locally but with reconviction rates from young offender institutions running at around 75%, new efforts need to be made to get individual young people and their families out of trouble and avoid herding them into groups.
"Measures proving successful so far include mentoring and supervision, restorative justice, treatment for young addicts and intensive fostering."