New guidelines could mean 3,000 fewer people each year being jailed for assault, the Sentencing Council has said.
The proposed changes could save the prison service more than £16m a year and the probation service £3m.
Those convicted of assault in England and Wales will be sentenced on the basis of the harm they caused victims.
Sentencing guidelines for assault offences are currently based on a description of the offence.
Although fewer criminals would face prison, Lord Justice Leveson, chairman of the Sentencing Council, which is consulting on the guidelines for judges and magistrates, insisted: "None of us are soft on crime."
The new proposed guidelines were "not driven by the government" and its need to cut public spending, he said.
"That's not what's driving me. What's moving me is to get the system right, fair, proportionate and understandable.
"I'm very keen there should be a consistency of approach, whether (defendants) are sentenced by a judge in Bristol, Birmingham, Basildon or Brighton."
Under today's proposals, the current "undue emphasis on premeditation" will be removed and the focus will switch to the harm caused and the culpability of the offender.
It is hoped the proposed changes will ensure a consistent approach to sentencing and make them more easily understood by the public.
In a briefing at the Royal Courts of Justice in central London, Lord Justice Leveson said: "There has been an increase in the severity of sentences at the lower end of the assault range and I think we're trying to adjust that for reasons of proportionality, rather than anything else.
"If anything, I think there may be a slight increase at the very, very top, for the most serious offences of this type
The review will affect a large number of cases, with 84,000 offenders sentenced for assaults in 2008, and the "clearer and more coherent decision-making process" could be used as the basis for all future guidelines.
Currently, three of the four categories of assault occasioning actual bodily harm (ABH) include descriptions of premeditated assault with different levels of injury.
But many spontaneous assaults, including drunken violence in the street, do not easily fit into those categories.
The review follows a landmark Court of Appeal ruling last December, when Lord Chief Justice Lord Judge increased the sentences handed out to three men who were jailed over deaths resulting from unprovoked street attacks.
In the consultation document, the council said judges and magistrates had often not followed the existing guidelines and there had been a "general trend towards longer sentences for all assault offences" over the past 10 years.
The prison population was at a record high of 85,495 in England and Wales at the start of October.
The Criminal Justice Alliance, which represents almost 50 organisations, said the proposals would "halt the drift towards longer sentences and protect scarce resources in the prison and probation services".
Campaign director Jon Collins said: "Clear guidance like this can promote consistency and prevent a postcode lottery in sentencing, helping to make sure that offenders receive the sentence that they deserve."
The 12-week public consultation on the new guidelines will end on 5 January 2011.