Reusing old graves is the government's preferred option for tackling the problem of overcrowded cemeteries.
Old cemeteries could be re-used
The idea is being put out to public consultation but ministers say families could be allowed to opt out.
Home Office Minister Paul Goggins said there could be a "pressing problem" if long-term action is not taken.
The consultation will look at all the rules covering burials in England and Wales which have developed over the past 200 years.
There are currently different rules for public and church land and there are no laws covering burials on private land.
Under the new proposal, bodies could be exhumed and reburied at a deeper level to allow new coffins to be laid on top.
The government acknowledges there could be cultural and religious objections to graves which are more than one burial deep.
But the consultation document says there is "absolutely no question" of making reuse compulsory.
Families could be given the chance to opt out and war graves would be exempt, it says.
Launching the paper, Mr Goggins said: "There is pressure on space and so the question is: should we bring in new powers to reuse burial grounds?
"This is not a massive crisis today but if we don't look at it in the long term, it will become a pressing problem."
The minister said there would be questions about how long somebody should have been buried before reburial was considered.
The document asks whether 100 years might be appropriate - to ensure only skeletal remains were affected.
Alternatively, there could be a "scientific approach" where the effect of local soil on decomposition could be assessed.
Mr Goggins added: "This is a hugely sensitive issue.
"Legislation has been founded on a piecemeal basis over 200 years and I think everybody is agreed there is a need for reform."
The Home Office will this year conduct a survey of all 25,000 burial grounds in England and Wales to look at shortage of space and other problems.
Research seven years ago suggested inner London burial grounds would be full by this year - but the government cannot say what the current situation is.
They are also looking at creating new inspectors to ensure burial grounds comply with the law and set standards.
The consultation was welcomed by Anne Viney, chief executive of Cruse Bereavement Care.
She said the move was part of a more open and healthier approach to death and
"Some people will feel sensitive about the issue of graves being re-used at
all, irrespective of whether they are their personal, family graves," she said.
"We are looking for sensitivity and sustainability."
The consultation comes three years after the Commons environment select committee report called for reuse of graves.
The committee attacked the government for allowing many cemeteries to become so run-down as to "shame all society" in their lack of respect for the dead.