A commission set up by the Scottish government has called for the country's only women's prison to be demolished.
The former Lord Advocate, Dame Elish Angiolini, was asked to look at ways of improving the way women are treated by the criminal justice system.
It followed mounting concern about the number of women held in jail.
Her report recommends demolishing Cornton Vale prison in Stirling, which would be replaced with a smaller jail for long-term and high risk prisoners.
Other regional units would hold shorter-term and remand prisoners.
The Commission on Women Offenders report says that Scotland's criminal justice system needs a "radical reworking" if the number of female offenders is to be reduced.
It makes 37 recommendations, including the closure of Cornton Vale.
The commission also recommends that new powers be given to police and judges when they are dealing with women offenders.
These would allow police to issue conditional cautions and judges to impose combined custodial and community sentences. The measures are designed to reduce the number of women being sent to prison.
Dame Elish said the "significant cost to society" of locking up woman suffering from addiction or mental health problems could no longer be ignored.
"In my 28 years as a prosecutor, I saw at first hand the tragic impact of women offending and re-offending on their victims, the local community, their families and themselves," she said.
"Undoubtedly, some women must be in prison to protect the public and to mark the seriousness of their crime.
"But for women who are repeatedly committing lower level offences, we need to get better at tackling the root cause of their problems in the community, and allowing the community to benefit from the punishments imposed."
In 1999 the then chief inspector of prisons, Clive Fairweather, called for the female prison population - then at about 200 - to be reduced to 100.
Cornton Vale currently holds 309 women, with a further 132 being held in units at Edinburgh, Aberdeen, Inverness and Greenock prisons.
Research published last year suggested women are not any more likely to commit crimes than they were a decade ago, despite the female prison population almost doubling over that period.
Each female prisoner is said to cost the taxpayer about £55,000 a year.
Another former prisons inspector, Andrew MacLennan, said Cornton Vale was not an appropriate place to hold women who predominantly suffered mental health or addiction issues.
Members of the Angiolini Commission discovered during their investigation that there was an 80% reoffending rate for prisoners sentenced to six months or less - and 75% of women receive such short terms.
Only 30% of those sent to Cornton Vale on remand actually receive a custodial sentence, and 25% of the overall population of the jail are on remand, compared to 18% among male prisoners.
Research has suggested almost all women sent to prison arrive there with mental health problems or alcohol or drug addictions.
Commission members say most have low self-esteem and see imprisonment as reinforcing their feeling of low self-worth.
Alternatives to custody, such as community service, are often seen as being inappropriate for women, meaning courts have no option but to jail them.
Justice Secretary Kenny MacAskill welcomed the report.
He said: "It is vital that we find a more effective way of dealing with women offenders in 21st Century Scotland, and I will now consider this report in detail before making my formal response in the summer.
"The independent commission has made recommendations which, taken together, set out a vision for how we can work effectively with women to reduce their offending and ultimately reverse the 10-year upward trend in female imprisonment rates."
Scottish Labour's justice spokesman, Lewis Macdonald, welcomed the report and said the country's criminal justice system was "failing female offenders, their families and the very communities we seek to make safer".
He added: "Prison exists to punish and rehabilitate, but too often when women are imprisoned for low-level offences it does more to punish the families left on the outside that it does to rehabilitate and reform those on the inside.
"Reoffending for female offenders remains stubbornly high. Most have complex drug, alcohol and mental health issues that need to be addressed, but the current system is failing to do so."
Scottish Liberal Democrat justice spokeswoman Alison McInnes said the recommendations were "comprehensive and robust".
She added: "Our justice system has for too long been failing women offenders and our communities.The well-documented problems at HMP Cornton Vale have rightly grabbed the headlines and I am pleased that Dame Angiolini has highlighted the need for a new, fit-for-purpose facility to be built."
Scottish Conservative justice spokesman David McLetchie said there should be no rush to demolish Corton Vale and build a replacement until a "proper assessment" had been made of the number of women prisoners who "merit imprisonment for their crimes".
He added: "I am not convinced that this report has paid sufficient attention to the role of prison generally as a punishment, a deterrent and a centre for
rehabilitation, purposes which it serves for both men and women. We must be careful not to fall into the trap of portraying all women
prisoners as victims, rather than people for whom our courts have decided that imprisonment is the correct punishment for their crimes."