The government is considering the early release of "a few hundred more prisoners" fitted with electronic tags to cope with severe jail overcrowding.
The Home Office predicts there will be 90,000 prisoners by 2010
Home Office minister Fiona MacTaggart said it was one option being looked at.
The news came as it emerged that some prisoners are being held in police cells after inmate numbers reached a record 77,600 in England and Wales.
Prison governors said the tagging of offenders worked. Shadow home secretary David Davis warned against it.
Speaking on BBC Radio Four's World at One, Ms MacTaggart said a few hundred prisoners could be freed if the current demand for prison places continued.
"But we haven't made a decision about that, and it's actually premature to imply that we have.
"It's one of the options that we're looking at if this spike continues," she added.
She also stressed that people would only be released under the scheme if they had been "fully risk assessed".
"What we need to do is be very simple. We need to make sure the public is safe."
Plans to build more prison accommodation and the tougher use of community sentences are also being considered by the Home Office.
It stressed there was still capacity in the system and that, by next June, 1,000 extra prison places would be available.
BBC home affairs correspondent Danny Shaw said 67 prisoners were held in police cells on Tuesday night and 107 on Monday.
The worst affected areas have been London and the West Midlands, but some prisoners have been held in police stations in other parts of the country, such as the south coast of England.
Charles Bushell, general secretary of the Prison Governors Association, which has been calling for more early releases, said ministers had known for months that prisons were at or near capacity.
Numbers had grown particularly in the last two months and ministers could not now build their way out of the situation, he said.
He said: "Tagging works in that it gets people back into the society which inevitably they are going to have to return to, and it does so in a way that constrains them - particularly in the evenings when they might be out causing trouble."
Some 90% of prisoners out on tags get through their sentence successfully, he added.
Shadow home secretary David Davis said the current situation was the result of "very, very bad planning on the part of the government".
A prison building programme should be instigated, he said.
While Liberal Democrat home affairs spokesman Mark Oaten said the government's prison policy was in tatters.
"It began with tough sounding measures and locking more people up, but now the prisons are full they are going to release people early."
Sentence lengths should be set to punish and rehabilitate not as a panic measure, he added.
However, Juliet Lyon, from the Prison Reform Trust, said tagged prisoners living in the community were more likely to get work and face up to their crimes, as long as they received "quality" supervision.
Under the plans to widen the early release scheme, criminals sentenced to four years in prison could be released after 18 months. A two-year sentence would mean just six months spent in prison.
Currently non-violent offenders are released halfway through their sentence if they behave well.