The BBC has welcomed government support for the licence fee but said viewers would ultimately decide its fate.
Michael Grade said only the licence fee could secure BBC services
On Wednesday Culture Secretary Tessa Jowell announced the licence fee would be kept for at least another 10 years.
BBC chairman Michael Grade said the fee was the only way to maintain the BBC's current level of service.
"The future of the licence fee is in the hands of the BBC to demonstrate it can maintain the overwhelming support of licence fee payers," he said.
"If we lose public support for the licence fee, that's when it is in jeopardy."
BBC director general Mark Thompson said the retention of the licence fee would help the BBC to embrace future broadcasting technology.
"I think it quite telling that the government has concluded not only that the licence fee should be there for the next decade, but that it can help lead Britain into the digital era," he said.
"For something that is meant to be falling out of fashion it is quite central for the government's plans for broadcasting."
Government support for the licence fee was included in its Green Paper alongside a raft of proposals for the corporation.
It plans to replace the BBC governors with two new bodies and told the BBC told not to "play copycat" or "chase ratings for ratings sake".
"Very few people set out to make derivative programmes but there are fashions in television," said Mr Thompson.
"We are planning a creative review to make sure that we are ready for the next stage in BBC history, to take risks."
The BBC will aim to make "searching, ambitious programmes" and "try to pay a bit less attention to other people's fashions", Mr Thompson added.
'Failed to modernise'
Both Mr Thompson and Mr Grade welcomed the plans for the BBC Trust, which aims to be the voice of the licence fee payer, and the executive board, which will carry out the BBC's day-to-day management.
Mr Grade said he saw a "fault line" in the running of the BBC when he became chairman last May.
"It had failed to modernise over the years," he said. "The need to repair that was pretty urgent."
In opting to scrap the BBC's governors, the government rejected Mr Grade's own plans to reform the system from within.
"I am very torn," Mr Grade said. "I believed totally that what I was doing and what the governors were doing would fix the problem.
"But as the debate continued I had to admit that my reforms were not really future-proof.
"It depended to a large extent on the last board of governors and how they interpreted it, and from a parliamentary point of view I can understand why that was not satisfactory."
He concluded: "I am happy to sign up for the new government proposal because I believe it is workable."