The government has abandoned plans for five community prisons for women in England and Wales.
Instead, the Ministry of Justice will trial five residential centres to help offenders with issues such as finding work and drug rehabilitation.
Justice Secretary David Gauke said short custodial sentences had failed to halt the "cycle of offending".
Campaigners and police bodies have warned the provision for women must be "properly funded".
Meanwhile, a justice minister has said sentences under a year should be axed for all but the most serious crimes.
Rory Stewart told the Commons Justice Select Committee that community penalties were more effective and he wanted to "significantly reduce, if not eliminate" terms of under 12 months.
Mr Gauke cited figures that 70.7% of women and 62.9% of men released from custody between April and June 2016 after a sentence of less than a year went on to re-offend within 12 months.
He said there was "persuasive evidence" that the new approach would help reduce re-offending rates.
Mothers at the trial residential centres might be able to have their children with them, he added.
Funding concerns
The government has pledged to spend £5m over two years on "community provision" for women.
The Association of Police and Crime Commissioners welcomed the change in strategy.
But Dame Vera Baird QC, representing the the Association of Police and Crime Commissioners, warned the scheme would only work if properly funded and questioned the MoJ's decision to hand £50m - originally earmarked for the prisons - back to the Treasury.
Frances Crook, chief executive of the Howard League for Penal Reform, said ministers deserved "real praise" for the change in approach but - like the Association of Police and Crime Commissioners - warned it was "essential" that programme was "properly funded".
Peter Dawson, director of the Prison Reform Trust, said "thousands" of women would benefit from the change.
He described the strategy as a "welcome recognition of the futility of short prison sentences" for women whose offending is often driven by "unmet mental health needs".
During Tuesday's appearance at the Commons Justice Select Committee, Mr Stewart said although he wanted to scrap short prison terms, there would be cases - such as violent or sexual crimes - where prison terms were justified.
The Penrith and The Border MP said: "My number one priority is to protect the public and I believe that the best way of protecting the public is to significantly reduce, if not eliminate, the under 12-month prison population because people on community sentences are less likely to reoffend than people who are put in prison.
"I am not going to be reducing the prison population just to save money.
"If somebody ought to be in prison, they ought to be in prison, and then my job is to go to the Treasury and get the money to pay for that prison place."