The DNA of most innocent people arrested in England, Wales and Northern Ireland will not be kept for more than six years, the Home Office has said.
But police may be allowed to keep DNA from terrorism suspects, even if they are later freed or found not guilty.
The move comes after the European Court of Human Rights ruled last year that the National DNA Database was illegal.
Ministers say the package of proposed reforms will protect privacy but also allow police to use DNA to solve crime.The National DNA database in numbers
The European Court of Human Rights said the database in England and Wales was illegal because it allowed police to indefinitely retain the profiles of people who had been arrested - but never actually charged or found guilty of a crime.
However, it said the Scottish part of the database was legal because police deleted most of the profiles falling into this category.
The new rules will also apply to Northern Ireland's DNA store, which is run the same way as in England and Wales, the Home Office confirmed.
Unveiling a package of measures to address the court's judgement, the Home Office said the government had come up with a solution that balanced the public's concerns with the legitimate operational needs of the police.
The measures, including new guidance for police forces, will need to go before Parliament. The Conservatives and Liberal Democrats will oppose the plan, saying the system should be the same as in Scotland.
But Home Secretary Alan Johnson said: "It is crucial that we do everything we can to protect the public by preventing crime and bringing offenders to justice.
"The DNA database plays a vital role in helping us do that, providing thousands of crime scene matches every year and helping to put many criminals behind bars where they belong.
"I believe the proposals represent the most proportionate approach to DNA retention, as well as the most effective way of ensuring the database continues to help us tackle crime."
Leander Clifton told BBC News he had ended up on the DNA database after a minor scuffle between his dog and another in the market at Kingston-upon-Thames in Surrey last year.
He was arrested after a woman fell and grazed her hand. At the police station he was stripped and had a DNA sample taken but was released without charge.
Mr Clifton said it had taken more than four months of pressure to have his DNA profile destroyed.
He said: "It's appalling that my civil liberties have been manipulated in this way by a government that is set upon, day by day, tweaking and taking away tiny bits of our civil liberties and thinking no-one will notice. I feel absolutely outraged.
"The government should have the courage to widen the database to every single person in the UK. Either everybody should be on it or no-one - unless they have been convicted of a crime.
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