A bill drafted by the Justice Ministry will be submitted to the Parliament, the State Duma, by the end of this month, a Duma source told Gazeta.ru.
The Moscow Times reports the legislation would abolish prison terms for many offenses in favor of alternative punishments.
First offenders for some economic crimes will not be jailed if they repay damages six times over. Other minor and first-time convicts would get fines, house arrest or forced labor instead of prison.
Drug users would be offered treatment in lieu of jail.
The bill follows other moves by President Dmitry Medvedev to make criminal legislation more humane.
The detention of white-collar suspects was banned last year, and minimum sentences were dropped for 68 offenses a few weeks ago.
Officials cite rising recidivism as evidence that prison does not rehabilitate criminals.
A Kremlin spokesman would not comment on the bill.