Commons Leader Harriet Harman has told the BBC she wants the law to be changed to make it illegal to pay for sex.
She said ministers were to look at how Sweden brought in such a law, and said a "big debate" was needed in the UK.
It would counter international human trafficking which sees girls bought and sold by criminals in the UK, she added.
Buying or selling sex is legal, but many activities related to prostitution such as kerb crawling, brothel keeping, pimping and soliciting are not.
The government has toughened its stance on prostitution in recent years, after initially considering "tolerance zones".
Plans to permit small brothels, with two prostitutes and a maid, to operate legally also appear to have been shelved.
A Home Office spokesman said the idea was being put out to "further consultation" after concerns were raised about its impact on local neighbourhoods.
The government is carrying out a wholesale review of the laws around prostitution, with the aim of reducing demand and increasing the safety of sex workers.
But Home Secretary Jacqui Smith said there would be a "mini review" looking at lessons from Sweden, after home office minister Vernon Coaker's fact finding trip there in the new year.
She said: "We recognise that there is considerable support for us to do more to tackle the demand for prostitution and to prevent the trafficking of people for sexual exploitation."
A Home Office spokesman said it was "too early to say" whether any changes to the law would apply across the UK or just in England and Wales.
The Sexual Offences Act 2003 made it illegal to buy sex from anyone aged under 18 and introduced tough penalties for trafficking adults and children for the purposes of sexual exploitation.
UK PROSTITUTION LAWS
Prostitution is not illegal
Brothel-keeping is a criminal offence
Kerb-crawling and soliciting are also illegal
The Sexual Offences Act 2003 introduced penalties against those who sexually exploit children
Trafficking adults or children for the purposes of committing sexual offences was also outlawed
It is not illegal for an individual aged over 18 to work as a prostitute in off-street premises but where there is more than one prostitute, the owner of the premises can be prosecuted for keeping a brothel.
Many of the activities associated with street prostitution, such as soliciting and kerb-crawling, are also illegal and it is against the law to advertise sexual services on cards in telephone boxes.
The current laws are largely aimed at reducing nuisance for local neighbourhoods, a Home Office spokesman said.
But Harriet Harman says more needs to be done to tackle demand and protect women.
'Very big debate'
She told BBC Radio 4's Today programme: "Just because something has always gone on, doesn't mean you just wring your hands and say, 'Oh well there's nothing we can do about it'.
"We do need to have a debate and unless you tackle the demand side of human trafficking which is fuelling this trade, we will not be able to protect women from it.
"That is what they've done in Sweden. My own personal view is that's what we need to do as a next step."
Ms Harman, who is also deputy Labour leader and equality secretary, said she wanted a "very big debate" on the issue involving groups such as the Women's Institute, community organisations, Church and other faith groups.
This should look at whether "we think it's right in the 21st Century that women should be in a sex trade or do we think it's exploitation and should be banned".
Ms Harman said action needed to be taken to tackle the demand side of international human trafficking, which had led to "teenage girls being bought and sold by criminal gangs in car parks in this country".
She was speaking after talks with newspapers over small advertisements offering services at brothels believed to be linked to human trafficking.
Ms Harman said there was to be new guidance from the Newspaper Society next month that would address the issue.
"The new guidance will stop those ads. But the next question is - can we really stop this trade when we've still got a lawful sex trade going on?"
The English Collective of Prostitutes attacked Ms Harman's support for the Swedish system and urged her to look at New Zealand's system of legalising brothels instead.
Spokeswoman Cari Mitchell said the Swedish system of criminalising men who buy sex had forced prostitution further underground and "made women more vulnerable to violence".
Alan Gordon, vice chairman of the Police Federation, also spoke out against further criminalisation, adding: "A move towards legalising state-run facilities would certainly be something which could be examined, as they could possibly eradicate underground prostitution and therefore have a knock-on effect on human trafficking."
Ms Harman's words were welcomed by Tory MP Philip Hollobone who is campaigning for a ban on selling sex but Lib Dem spokesman David Howarth said a ban could put women in more danger.
UKIP MEP Godfrey Bloom said "consensual prostitution" should remain legal adding: "Ms Harman said that she wants to look at ways of ending the 'exploitation' of women but outside of sex trafficking, it seems to me that it's the women exploiting the men."