Justice Secretary David Gauke is already looking at the possibility of scrapping jail terms of six months or less, with exceptions made for violent and sexual offences.
The move is backed in a new report from the Justice Select Committee.
It said: “The scale of the prison population crisis is such that it requires a fresh and decisive response.”
The committee suggested the approach could go further, urging the Government to “model” the effects of abolishing sentences of less than 12 months in England and Wales.
Plans are already in place to introduce a “presumption” against custodial terms of under a year in Scotland.
Mr Gauke signalled a departure from the Tory “prison works” mantra as he revealed his vision for “smart justice” earlier this year.
Short custodial terms would be replaced by “robust” community orders under the blueprint.
Penal reform campaigners are in favour, but Tory MP Philip Davies labelled the plans “stupid” last month after obtaining figures showing criminals jailed for six months or less have committed more than 50 previous offences on average.
A safety crisis has swept through much of the prisons estate in recent years, with assaults and self-harm at record levels.
The committee warned it was a “grave and worsening” situation, which was unlikely to improve with the current prison population.
It said: “We are now in the depths of an enduring crisis in prison safety and decency that has lasted five years and is taking significant additional investment to rectify, further diverting funds from essential rehabilitative initiatives that could stem or reverse the predicted growth.”
Over the past 25 years, the prison population in England and Wales has almost doubled in size, the report said.
At the end of last week, there were 82,417 inmates in jail.
The nature of the prison population is rapidly changing, with a higher proportion of offenders behind bars for serious violent or sexual crimes and an increase in the average age of inmates, according to the committee.
It called for a focus on services to reduce the £15 billion annual cost of re-offending, and suggested ministers should consider whether judges could be given a role in monitoring those they sentence to community punishments.
The assessment also raised concerns that support given to 10 jails chosen for a £10 million safety drive could be at the expense of others in “serious need”.
Prisons Minister Rory Stewart has pledged to resign if the scheme fails to achieve a reduction in violence and drugs at the selected establishments.
Conservative MP Bob Neill, who chairs the committee, accused the Ministry of Justice and Treasury of taking a “crisis management approach” to prisons.
He added: “Throwing money at the prison system to tackle multiple issues takes funding away from external rehabilitative programmes that could stem or reverse many of the problems.”
Peter Dawson, director of the Prison Reform Trust, said the report provides a “unanimous endorsement of the Government’s wish to abolish pointless short prison sentences”.
Liberal Democrat justice spokeswoman Wera Hobhouse said: “Our prisons are in crisis. They are so overcrowded that they are failing at their central purpose: to prevent crime and keep communities safe by rehabilitating offenders.”
Prisons Minister Rory Stewart said the report “sets out the scale and complexity of the challenges facing the prisons system”.
He added: “Our clear focus is on rehabilitating prisoners to reduce crime and keep the public safe, but this can only happen if prisons are safe and decent.
“That is why we are investing significantly in improving conditions and security, and developing a long-term strategy to deliver prison places and reduce violence.”
Welcoming the committee’s support for “our ongoing work considering options for sentencing reform”, Mr Stewart said: “While prison will always be the only place for serious and violent offenders, there is persuasive evidence showing community sentences are often more effective in reducing re-offending than short spells behind bars.”
Mark Leech, Editor of The Prisons Handbook for England and Wales said:
“I am absolutely with this in principle, but my problem is that it’s predicated on having an effective probation service in place to monitor the replacement community sentences – and the fact is, as HMI Probation made clear just two days ago, that we just don’t have that.”
Lord Burnett, the Lord Chief Justice, told the Constitution Committee that statutory changes, including some “exceptions to the general rule”, may bring widespread revisions of Sentencing Council guidelines.
He also pointed out there may be cases where properly monitored non-custodial sentences can be effective.
He said: “It is perhaps a little bit simplistic to suppose that all offenders are affected in the same way,” adding: “A curfew for an 18, 19, 20-year-old is quite a punishment, possibly, and the technology now enables that to be monitored properly.”
Lord Burnett added: “I hope that when there is a debate about sentencing – and it no doubt will extend a good deal beyond the question of whether there should be fewer or very few sentences of custody at less than six months, or a year, or whatever figure people identify – I hope that it will be informed by a really deep understanding of the impact of sentences on offenders and offending, and also that it will be informed by a proper look at what is going on around the world.”