The scheme, similar to one in the Dutch city of Utrecht, will be recommended in a report to go before the council's community affairs committee next Monday. It was compiled by Bill Gray, the committee's chairman.
Last night, the plan was discussed at a meeting attended by hundreds of local people in the Balsall Heath area of Birmingham, the city's main red-light area, where groups of residents have been chasing prostitutes away and taking car numbers. The debate was often heated, with unpopular speakers being booed. One woman who tried to defend the prostitutes received a particularly hostile reception.
By contrast, organisers of the pickets who have been out on the streets in recent weeks to discourage prostitution received rapturous applause. But Mr Gray warned them: 'You haven't solved it and you haven't really stopped it. You have just moved it.'
Birmingham City Council has already taken traffic control measures such as creating cul-de-sacs to make kerb-crawling more difficult, but it recognises that such policies only move the problem.
Mr Gray's report has not been made public yet but supports further traffic control and a Utrecht-style scheme. He said last night: 'I do not believe we would need a change in the law to introduce a pilot scheme. What I am hoping to do is to shift prostitution out of Balsall Heath to an area where it is acceptable because it is non-residential.'
In Utrecht, the system has operated in an industrial estate five minutes from the city centre for several years. Customers arrive by car, select one of 40 women who operate out of parked vans and then go to screened-off parking bays. If one of the women is absent for longer than usual, the other prostitutes phone the police. One woman has been murdered.
Mick Rice, Labour councillor for Sparkbrook ward, which includes part of Balsall Heath, said last night that there were already some de facto toleration zones in Britain. The report seeks to put this on a more official basis.
Lynne Jones, Labour MP for Birmingham Selly Oak, yesterday urged the Commons to decriminalise prostitution and provide discreet areas where the women could work. However, the report's proposal, which will be voted on by the full council in September, received a hostile response from the police and the Home Office.
Superintendent David Claydon, of West Midlands Police, said: 'We are not convinced that a tolerance zone is going to solve the problem. If you made a major change in legislation where would you put these zones? Businesses on an industrial estate are not likely to be keen on the idea.'
At present, the law bans soliciting for prostitution but not the trade.