All schools in England will be given the chance to be "independent, non fee-paying schools" says the Prime Minister Tony Blair.
Tony Blair says the pace of state sector reform must accelerate
In his monthly press conference, Mr Blair promised to "accelerate change" in the state sector - allowing schools more "freedom to innovate".
Mr Blair said his government's plans for "radical reforms" would give "more power to parents".
A White Paper, due this month, will provide the "route map", said Mr Blair.
Sending a message that the process of reform in the state school sector is not going to slow down, Mr Blair promised more autonomy for schools and more choice for parents.
"We can either soft pedal these changes and hope to see some further incremental improvement - or seize this moment and drive through lasting radical reform that will cement the renewal of our state education system for this generation," said Mr Blair.
"The challenge is clear - we need to deepen the change. That means giving more freedom to schools, more power to parents, more opportunities for children.
"By the end of this third term, I want every school that wants to be to be able to be an independent, non fee-paying state school, with the freedom to innovate and develop in the way it wants and the way the parents of the school want, subject to certain common standards."
The forthcoming White Paper from the Education Secretary Ruth Kelly is expected to suggest ways in which schools can innovate and which parents can have more choice.
The independence promised by the prime minister will make it easier for both primary and secondary schools to adopt "foundation" status - giving them more control over their affairs and a more detached relationship with local education authorities.
Parents will also be given a fuller picture of the individual progress of their children - looking deeper into the tracking data that schools hold on pupils.
Ms Kelly has pointed to the lack of school choice for poorer families who cannot afford to buy houses in the areas that will get them a place at a successful school.
This has raised questions as to how school places could be allocated, so that more families have access to the best schools. A survey this week from the Sutton Trust showed that better-off families dominated the intakes of the top 200 state schools.
There have been suggestions of improved transport to bring more schools in reach of all families - and changes to admissions rules to widen access.
It is expected that more "new providers" will be encouraged to set up schools - such as parents' groups, religious and community organisations and partnerships with the private sector.
In his press conference, Mr Blair echoed this concern over a lack of school choice.