Welsh universities should be allowed to charge their students up to £3,000 a year for tuition, according to a review body on higher education funding.
Future students in Wales could face fees of up to £3,000 a year
The Rees Commission has recommended similar fees in Welsh universities to those in England.
But it says the assembly should consider if Welsh students studying in Wales should have extra financial help.
On Tuesday, opposition parties instructed the Welsh Assembly Government not to adopt top-up fees.
If the Rees Commission advice is followed, top-up fees would begin in 2007-8, although the money would be paid after graduation.
The report also calls on the assembly to look into whether students living in Wales before they go to university should pay a reduced fee, subsidised by the assembly government.
In addition, the report recommends a Welsh National Bursary Scheme to provide targeted assistance aimed at students with low incomes and to support mature students and those with dependants.
All UK students are currently charged a flat fee. All or part of the cost is met by local education authorities, in the case of students from low-income families.
In England, that system will be replaced by a new variable fee in 2006, with universities able to charge up to £3,000 a year.
The Labour assembly government has pledged not to introduce variable fees during its current term, which ends in May 2007.
Welsh Education Minister Jane Davidson congratulated the commission - chaired by Professor Teresa Rees of Cardiff University - on a "comprehensive, weighty, and authoritative piece of work", but added there would be additional costs associated with delivery of any of the options recommended.
"We need to consider the budgetary implications very carefully - budgetary implications for the assembly, not just the education budget," she said.
REES REPORT SUMMARY
Universities should be allowed to charge full-time students flexible fees from 2007-8 of up to £3,000 a year
The fees would begin to be repaid when a graduate's income reaches a specified level
A "simple and easy to administer" Welsh National Bursary Scheme would target students with low incomes and could help mature students or those studying in Welsh
An independent review needed to look at "an affordable, simple and transparent system" of fees and support for part time students
Increased investment in the HE sector by the Assembly to meet "considerable funding gap"
Professor Rees said: "The abolition of tuition fees was considered in depth by the panel.
"At the outset some members (of the commission) were in favour of it.
"However, after reviewing the evidence, we came to the view that it is not a realistic option.
"It would attract many students from outside Wales who would effectively be subsidised from Welsh education funds (and) cause considerable instability in the Welsh higher education sector."
Bethan Jenkins, president of Aberystyth Students' Union said she was "shocked" at the top-up suggestion.
"I was expecting a different structure for Wales," she said. "Again, we see Wales selling out and following England with the top-up fees debate.
"As far as I'm concerned we should not even be considering more fees for students. These fees are merely deferring debt for students until after they graduate. There is no doubt in my mind that this will stop many people from entering Higher Education."
The report's publication follows Tuesday's defeat of the Welsh Assembly Government when opposition AMs - including independent former Labour AM Peter Law - voted by 30 to 29 to rule out the introduction of university top-up fees in Wales.
Conservative leader in the assembly Nick Bourne called the report "a whitewash" and said it vindicated the decision to press ahead with the debate.
He said: "It contains precisely what we thought it would. It is the report Rhodri Morgan and Jane Davidson wanted, but not what the people of Wales wanted".