The planned changes, which will be considered by a cabinet committee, are believed to include proposals for the construction of two new aircraft carriers, costing pounds 3bn, to replace HMS Invincible, Illustrious and Ark Royal.
However there could also be a number of cuts, with a reduction in the number of serving frigates, tanks and Jaguar attack aircraft.
The principal objective of the plans by the Secretary of State for Defence, George Robertson, is to retain the services' capabilities while cutting out costly duplication. He is understood to have suggested that the three services could share certain facilities.
He is also believed to want to restructure the forces to improve their ability to deploy rapidly in trouble spots overseas. However, this could also see Britain further cutting back on its presence in Europe. At the height of the Cold War, Britain had 55,000 troops in Germany; now there are just 17,000.
Mr Robertson has consistently sought to reassure service personnel that the strategic defence review - begun last year - was not a thinly disguised exercise in cutting significantly the services' pounds 20bn a year budget.
He is expected to argue that the recent focus on joint missions should be matched by joint training and equipment-buying, with support helicopters coming under a single command.
There would be an expanded role for the Permanent Joint Headquarters set up at Northwood, west London, two years ago.
It is thought that the Ministry of Defence is resisting Treasury pressure to reduce the number of nuclear powered submarines from 12 to 10.
An MoD spokesman last night confirmed that the plans would go before the cabinet committee by the end of the month. But he added: "Any talk of the precise details of what is going to happen is nothing more than speculation.
He said that any decision taken would be made public later in the year when the Government published a White Paper.Reuse content