The plans could see prisoners being allowed to work during the week before returning to their cells at the weekend.
According to a report in The Times newspaper, the prisoners would be monitored by satellite trackers while on day release.
Foreign inmates could also see their sentences reduced by at least nine months if they agree to leave the country, the report added.
A Ministry of Justice spokesman said: "We want foreign criminals deported as quickly as possible.
"We also want to ensure the sentences handed down to British criminals keep all our citizens safe.
"Protecting the public is our first responsibility and we won't compromise on that for any reason."
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