The age that children in care in England can stay with their foster families will rise from 18 to 21 under new Department of Education plans.
The government are set to impose a legal duty on councils to provide financial support for those who want to stay longer with foster carers as part of the third reading of the Children's and Families Bill next year.
Children and Families Minister Edward Timpson has pledged £40m over the next three years to fund the plan in a move the National Children's Bureau has described as "a real step forward".
NCB Director of Evidence and Impact Enver Solomon said: "These reforms will provide much-needed stability to vulnerable young people, many of whom have had the hardest starts in life.
"Most importantly it will help put support for foster children on a par with other young adults and allow them to enjoy the emotional support of family relationships as they make the transition to adult independence. It is a real step forward towards a fairer deal for foster children and a considerable contribution to improving their life chances."
A growing number of local authorities have begun to offer young people the choice to stay, but as part of the scheme now all councils will have to follow their example, and have £40m funding allocated towards the cost.
Timpson, whose own family fostered nearly 90 children, said: "I know from the many foster children I grew up with how crucial it is for them to be given sufficient time to prepare for life after care.
"Our reforms will allow the 10,000 young people leaving stable and secure homes to make the transition from care to independence when they are ready, rather than when their council tells them to."