Traditional degree classifications would be scrapped in favour of a US-style average points score and a detailed transcript of achievement under government proposals to be put forward in the new year.
Department for Education and Skills sources have confirmed that the classification system is under review, and ministers are expected to herald its demise in their higher education strategy document.
Academics and administrators who met to discuss the issue this week described the present system as an archaic "blunt instrument" and agreed to develop plans for an alternative, based on a "student-progress file".
The DFES would not be drawn on any detail, but it is understood that higher education minister Margaret Hodge has decided that grade inflation has rendered the system of broadly banding students' achievements into first, second and third-class degrees irrelevant.
She told a fringe meeting at the Labour Party Conference last month that "there is something that leaves us with bit of concern in the current regime".
Ian Gibson, chair of the House of Commons science and technology select committee, said that Ms Hodge had confirmed that she wanted to look at the issue as part of the strategic review. "It's an unwritten rule that you can only have so many firsts or 2:1s ," he said. "We do not want to have the same sort of problems in universities that we saw with A-level marking."
Academics meeting this week for the Student Assessment and Classification Working Group acknowledged that the system was no longer effective. "Most agree that the classified degree has had its day," said Lewis Elton, professor of higher education at University College London, who was due to speak at yesterday's meeting. "It has become pretty meaningless: the idea that you can compare an upper-second from one institution with one from another is silly."
Peter Williams, chief executive of the Quality Assurance Agency, said that the ministers' enthusiasm for a change was "terrific". "Degree classifications provide very little information about a student's achievement, and they give a pretence of accuracy. They are such a blunt instrument."
There is less agreement on a replacement for the system. It is understood that ministers believe there needs to be more direct comparability between institutions and more fairness in reflecting students' abilities, as institutions use different methods to calculate overall classifications.
There is also concern that a majority of students achieve the same classification - with as many as 80 per cent of students achieving an upper-second on some programmes.
Mantz Yorke, professor of higher education at Liverpool John Moores University and a founder of the group, said there was interest in the US system of awarding grade-point averages.
US graduates are given a single average score between 1 and 4, reflecting their performance on all modules and units. And because students can achieve anything from the top grade 4, through 3.9, 3.8, 3.7, to fail, this allows for much finer divisions between students while still providing on easy-to-understand overall score.
Professor Elton said: "Margaret Hodge wants to replace classifications with a US system of grading. There are advantages to this, but it hides the fact that certain aspects of learning are difficult to grade. I believe that degrees are so varied and complicated, with modularisation, that only a detailed profile can say what a student has achieved."
Many academics support the promotion of student "progress files", or records of achievement, which are already being piloted in some institutions and could supplement an overall degree classification or points score with a detailed transcript.
Norman Jackson, a former director at the QAA, has led the drive for progress files and is now part of a joint Universities UK, QAA and Learning and Teaching Support Network group hoping to implement them.
"Progress files are about adding to the classification system - classification captures overall performance while the progress files add important information. They can make provision for highlighting work experience, or students' study abroad." He added that progress files would also spell out exactly what students had learnt and how they had performed in each area of a degree.
"The line we are getting from the DFES is that it is interested in exploring how the progress file can support widening participation and employability. The files will help students to explain what they can do," Dr Jackson said.
A spokesman for the DFES said: "Our future plans will become clear after the January strategy document."