A Green Paper on local government also suggests citizen's juries, focus groups and referendums in an overhaul designed to "modernise Britain, giving power back where it belongs - to the people", the Deputy Prime Minister said.
Local authorities could also be allowed to select executive mayors and run their operations under Cabinet-style committees.
Mr Prescott said the Government would give priority to legislating for the changes once a consultation had taken place.
"At the end of the process, we want councils that represent their people more effectively and respond to their needs. This is an area where we can lead the world," he said.
The document, Modernising Local Government, aims to make authorities more representative by winning back voters lost from the electoral rolls and attracting a wider range of councillors. Ministers hope plans for the electoral register to be updated constantly instead of just once a year might help to win back some of those who are missing, estimated at between 2 and 4 million people.
They say it might also help to improve turnouts, which are just 40 per cent in local elections here compared with 93 per cent in Luxembourg, where voting is compulsory, and 80 per cent in Denmark, where it is not.
The document said 35 per cent of councillors were retired, 75 per cent were male and too few were from ethnic minorities. By reforming the time- consuming system of committee meetings set up in Victorian times more of the under-represented groups might be persuaded to stand for election.
The document proposed separating the executive and representational functions of councillors to provide greater clarity about who was responsible for decisions. Under such a system "backbench" councillors could be more effective and have a higher profile while taking on a lighter workload, it suggested.
Sir Jeremy Beecham, the chairman of the Local Government Association, welcomed the paper and said it marked the beginning of a new era for local authorities.
However, he added that they also needed to see capping abolished and non-domestic rates returned to local control.
"Increasing democracy is not just a laudable aim in itself, it is necessary if we are to show electors that local government is important; that their councils can make a difference to their lives.
"However, greater financial autonomy is just as important in making this connection," Sir Jeremy said.