Children in foster care will be able to stay with their carers until they are 21 under a radical shake-up of the care system.
Teenagers in England will no longer be forced to leave their foster families when they are 18, c hildren and families minister Edward Timpson announced.
The measure will mean that young people in care will be able to leave their foster families when they feel ready, rather than when they reach a pre-determined age limit, a Department for Education spokeswoman said.
The measure has been hailed as been hailed by a care charity as the most significant reform for children in care in a generation.
The Who Cares? Trust said allowing youngsters to stay with foster parents until they are 21 means they will receive security and support at a "crucial time" in their lives.
There will be a new legal obligation for councils to provide financial support so teens can be supported into early adulthood if they choose, Mr Timpson said.
He said local authorities will receive £40 million over the next three years to put the support arrangements in place.
"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," said Mr Timpson, whose family fostered nearly 90 children.
"A growing number of local authorities already offer young people the choice to stay but with little financial support it can be challenging for their foster families. Now all councils will have to follow their example, and we are giving them £40 million towards the cost.
"This 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."
Natasha Finlayson, chief executive of the Who Cares? Trust, said: " This is absolutely fantastic news for thousands of young people in foster care, giving them vital security and support at a crucial time in their lives. It represents the most significant reform to the support children in care are given in a generation.
"Time and again we hear from young people who are extremely anxious about having to leave their carers when they turn 18 and effectively no longer having somewhere they can call home, especially when the average age for young people who aren't in care to finally leave home is 24 to 27.
"When the state takes children into care, we have a moral duty to do our best to ensure that they are loved and cared for and to provide them with support and a home beyond their 18th birthday, like all good parents do, including somewhere to come back to in the vacations if they go to university.
"It is excellent news that the Government has agreed that young people leaving foster care should not be left to fend for themselves at 18."
The measure will be introduced during the third reading of the Children and Families Bill next year.
Matt Downie, head of campaigns at Action for Children, called on Wales to follow England's lead.
He said: "We have been asking for the care leaving age to be increased for decades - this is a long time coming but a vital change for vulnerable children and young people.
"The trauma that many experience before being taken into care can mean that they are not ready to leave care. Many are forced to live independently as young as 16 and we know that this can be a dangerous and lonely experience.
"Today we are launching a campaign calling on the Welsh Government to follow the policy announced by the Department for Education.
"Now is the time to ensure all young people in foster care have the chance to stay."