Further education colleges in England could be allowed to award some degrees, under government plans for the sector.
Ministers want colleges' focus to be on improving people's skills
Currently universities validate the two-year vocational courses leading to foundation degrees and make the awards.
Other reforms of the FE sector, outlined in the Queen's Speech, emphasise skills for the economy, with free training up to the age of 25.
The Learning and Skills Council would be able to remove college principals deemed not to be doing a good job.
Setting out her government's legislative plans at the state opening of Parliament, the Queen said there would be a Further Education and Training Bill that would "reform the further education system so it can better equip people with the skills that they and the economy need".
The white paper on further education said some 25,000 learners in colleges were studying on foundation degree programmes, designed and delivered in partnership with employers.
There should be a presumption that such higher education courses in colleges "should have a strong occupational and employment purpose".
"The major area of expansion will be foundation degrees", it said.
The chief executive of the Association of Colleges, Dr John Brennan, said it was delighted the government had listened to calls from colleges to free up foundation degrees.
"Colleges have been freed to use their existing strong links with employers and their local communities to tailor degrees to demand," he said.
¿This will open up higher education, capturing people who never thought they could attend university and boost the government drive to bring up to 50% of all those under 30 into higher education.
"It is a realistic, employer-based way for many people in work to approach a degree."
The director of the National Institute of Adult Continuing Education, Alan Tuckett, said: "We think this is brilliant news on two counts. Firstly, because at a stroke it shows in a practical way the government does value colleges.
"And secondly it's the first sensible, tangible step towards an articulated tertiary system of education for the UK which is exactly what adults need."
A government spokesman said the proposed bill would streamline the structure of the LSC, which funds further education, replacing its local offices with nine regional councils.
Employers and students would have more say on the learning that takes place.
Students would have more choice over what they study, as well as where and how they do their courses.
The spokesman said the bill would "play a key role" in "developing the skills this country needs to ensure its future as a prosperous nation".
"It would provide for a step change in the delivery of further education by establishing arrangements to ensure all further education provision is either good or improving."
The bill would apply mainly to England, but give the Welsh Assembly Government power to make similar reforms in Wales.
Liberal Democrat education spokesperson Sarah Teather said root and branch reform was needed, not "tinkering around the edges".
"Allowing colleges to award degrees is a small step in the right direction, but the work of universities and colleges in providing education needs to be better co-ordinated so that students can move between institutions more easily," she said.