The Home Office could be split into two departments under recommendations put forward by Home Secretary John Reid.
John Reid launched a review of the Home Office in May
One department would deal with security issues and the other with justice under the plans, which are set be to put to the Cabinet for discussion.
Mr Reid said part of the Home Office was not fit for purpose when he took over last year, and is presiding over a shake-up to improve performance.
The Home Office has been hit by a series of blunders in recent months.
Under Mr Reid's recommendations, the security department would be responsible for anti-terrorism policy, immigration and the security services.
The ministry of justice would have control of probation, prisons and stopping reoffending.
Writing in the Sunday Telegraph, Mr Reid said there would be "no sacred cows when it comes to protecting security and administering justice".
"Whilst in the short term my focus will be on putting right that which needs the most urgent attention - including the way we deal with the transfer of criminal records information and prison pressures - in the long term even more radical change may be unavoidable," he said.
BBC correspondent James Hardy said Mr Reid had discussed the plans with senior government figures, but said the future of the Home Office depended on who became the next prime minister.
"If it is Gordon Brown he is known to be taking an interest in security policy, what we don't know yet is whether this will be a runner with him."
Shadow Home Secretary David Davis said there was an argument for an extra cabinet minister within the Home Office with specific responsibility for security, but said a split could create "a whole new set of problems".
He added: "We must remember that while the last three years at the Home Office have been its worst three years in its two centuries of existence, previous home secretaries have managed to run the Home Office even when it had more responsibilities, including electoral law and the BBC."
Liberal Democrat spokesman Nick Clegg said his party had long argued that the Home Office should be split up.
However, it would be like "rearranging the deckchairs on the Titanic" unless it was accompanied by a whole new approach to home affairs, he said.
"The wholesale degeneration of our criminal justice system is largely due to a political culture of frenzied law making, short-term target setting and a day-to-day pursuit of headlines."
The recommendations are the result of a review Mr Reid set in motion last May when he moved into the Home Office.
Mr Reid pledged to "sort out" the department, saying that its immigration operation was "not fit for purpose".
He took over as home secretary after Charles Clarke was sacked in a row over foreign criminals released from prison without being considered for deportation.
But since then Mr Reid's department has continued hitting the headlines.
Earlier this month it emerged that more than 27,000 case files on Britons who had committed crimes abroad, including rape and murder, had not been entered on the police computer.
It also emerged that a third terror suspect on a control order had absconded.
And before that there was a row when it emerged the head of the Prison Service did not know how many inmates were on the run from open jails in England.