University places have been left unfilled because institutions are scared of being penalised for recruiting too many students.
Ministers announced they are giving universities the power to take on more students than allowed under their allocations to reduce the chance of places sitting empty.
Under the current system, the Higher Education Funding Council for England (HEFCE) can effectively fine institutions for exceeding their set student numbers by cutting their grant.
But this has led to universities taking a "cautious" approach to student recruitment, which can lead to unfilled places, according to Business Secretary Vince Cable and universities minister David Willetts.
In a letter to HEFCE today, setting out the priorities for higher education in the 2013/14 academic year, the ministers said there should be a "buffer zone", so institutions that slightly exceed their quotas are not penalised.
It said: "We know that many institutions will take a cautious approach to recruitment in attempting to avoid such grant reductions. This can lead to unfilled places.
"To reduce that risk for 2013/14, I would like you to allow institutions to recruit up to 3% above their total recruitment of HEFCE fundable students.
"This buffer zone would allow institutions to avoid grant reductions for minor over-recruitment. Grant reductions will continue to be applied where institutions recruit above these agreed number limits."
The letter adds that ministers want to "further liberalise the system" from 2014/15 onwards to allow popular universities to expand.
The University and College Union (UCU) said proposals to allow institutions to recruit extra students showed that Government changes to student recruitment had failed.
Recent reforms have allowed universities to take on as many students with at least two A grades and a B at A-level as they like.
This is being extended to cover students with at least ABB.
UCU general secretary Sally Hunt said: "The move to allow universities to over-recruit is an interesting one and presumably has been introduced after the failings of the Government's recent reforms, which left many universities with unfilled places."
Nicola Dandridge, chief executive of vice-chancellors group Universities UK, said: "We support the introduction of greater flexibility into the system, and had argued for a buffer zone to be introduced to allow universities to respond better to student demand.
"In 2012, some universities were unable to fill all their places due to the rigid limits on student numbers."
In November, Professor Sir Howard Newby, vice-chancellor of Liverpool University, revealed that thousands of places at the UK's top universities were left empty last year as a result of the Government's higher education reforms.
The 11,500 unfilled spots were an "unintended consequence" of the current overhaul of the university sector, he said.
Speaking at the Girls' Schools Association (GSA) annual conference in Liverpool, Sir Howard said: "One of the startling unintended consequences is that currently, this year, there is about 11,500 empty places in Russell Group universities."
This "certainly wasn't the intention" of the reforms, he said.
The reasons for the empty places are that "downward pressure on A-level grades meant that there wasn't as many around to recruit, there was some slacking of demand in certain subjects, mainly humanities and social sciences".
Universities also had to hand back a certain proportion of their places, which were then bid for by institutions that kept their fees to £7,500 or less.
These "core and margin" places also had an effect, Sir Howard suggested.