The length of custodial time under the so-called Detention and Training Orders (DTOs) will be increased or cut down to give offenders an incentive to improve their behaviour.
It is estimated that up to 200 young people aged 12 to 14 could be kept in detention around the country at any one time, at secure training units.
Children aged 12 to 14 awaiting trial, as well as the more vulnerable 15- to 16-year-olds, will be remanded for the first time to secure local authority accommodation, to combat the problem of bailed youngsters continuing on crime sprees.
Another proposal, unveiled by Jack Straw as part of a White Paper on youth justice, is the concept of a youth panel for first-time young offenders, where the culprits would be "confronted with the damage and human consequences of their crime". Under the idea - still under consultation - the youngster and their parents would have to draw up a good behaviour contract, lasting for up to a year.
Mr Straw told the Commons that his aim was to deliver a youth justice system which prevented youngsters getting involved in offending, as well as punishing those who did. The White Paper, No More Excuses, which will form part of next month's Crime and Disorder Bill, will also attempt to speed up the judicial process.
The White Paper includes plans for local curfew schemes to keep under- 10s off the streets, and a new Parenting Order.
Mr Straw added that he was chairing a new ministerial group looking at ways of supporting families more effectively.
As expected, the Government will abolish the rule of doli incapax, the presumption that children under 14 cannot commit a criminal act because they cannot distinguish between right and wrong.
Senior police officers welcomed many of the proposals. However, prison campaigners the Howard League warned that the new DTOs would lead to more younger children being locked up.