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Pensioners aged over 70 and not in the best of health could have their driving restricted.
They may be allowed to stay on the road if a tracking device is fitted to their vehicle.
It would curb their driving time to daylight hours only.
At present, drivers aged over 70 must inform the Driver and Vehicle Licensing Agency (DVLA) of any medical conditions that could affect their ability.
Their licence must be sent for review every three years.
Under proposed new rules drivers hit by illness could be eligible for “graduated licences”.
The permit would allow them to drive within a radius of 20-30 miles from home and only in daylight.
The scheme is proposed by the DVLA and Driving Mobility.
Edward Trewhella, the chief executive of Driving Mobility, said:
“A lot of older drivers stick within their own locality; they go to the shop, the doctor’s surgery, go and see a granddaughter down the road, probably on minor roads with which they are familiar.
“This process would regularise that and make it legal for them to do so as long as they didn’t take a trip outside of an area or outside of a time restriction.
“That would mean they were driving safely in their familiar environment.”
More older drivers are now on the roads; two thirds of motorists aged over 70 have a licence.
A Department for Transport spokesperson said:
“It is the law that all drivers must tell the Driver and Vehicle Licensing Agency about any medical conditions which might affect their driving.
“There are no plans to introduce graduate driving licenses for drivers aged 70 or over.”
