As he promised pro-business policies and hinted at tax cuts after the election, the Prime Minister warned that there will be no option of a life on the dole for under-25s, telling the Conservative Party conference that he wanted all of them "earning or learning".
Full details of the reforms are expected to be included in the Tory manifesto for the 2015 poll, but Downing Street aides said that young people who are not in work, education or an apprenticeship and decline to take up training places can be expected to lose their automatic entitlement to benefits including jobseekers' allowance and housing benefit.
Cabinet Secretary Sir Jeremy Heywood has been commissioned to carry out a review of training and education for under-25s, which will feed into the policy. He is considering reforms to offer support to young people while they undertake training programmes.
In his keynote speech concluding the Manchester conference, Mr Cameron appealed for the Conservatives to be given the chance to "finish the job we've started" by being returned as a majority government at the 2015 general election.
And he turned his fire on Labour leader Ed Miliband for "bashing business" and treating enterprise and the profit motive as "dirty words".
But the clearest signal of major new policies for the Tory election campaign came as he stated his determination to do more to intervene at an early stage to prevent young people becoming trapped in a cycle of unemployment and benefit dependency.
"Today it is still possible to leave school, sign on, find a flat, start claiming housing benefit and opt for a life on benefits," Mr Cameron told Tory activists.
"It's time for bold action here. We should ask, as we write our next manifesto, if that option should really exist at all.
"Instead we should give young people a clear, positive choice. Go to school. Go to college. Do an apprenticeship. Get a job.
"But just choose the dole? We've got to offer them something better than that...
"So this is what we want to see: everyone under 25 - earning or learning."
Plans to withdraw housing benefit from under-25s were first floated at last year's Tory conference, when the measure was estimated to save a possible £2 billion. Aides had no immediate figures for the potential saving from extending the idea to other benefits.
Critics warned that the measures would force more young people into poverty unless there is massive investment in education and training.
The general secretary of the University and College Union, Sally Hunt, said: "Educational underachievement costs the UK economy an estimated £22 billion a year. We will not resolve this massive problem by forcing young people into unstable, low-paying employment or inadequate training.
"What we need is a real plan at local and national level which provides sustainable and secure employment opportunities for young people and access to education which is useful and mind-broadening. Cheap headlines about lazy youngsters or cutting their benefits are no substitute for a strategy which is on the side of young people and allows them to realise their potential."
And TUC general secretary Frances O'Grady said: "Given the Government's awful track record of helping young people find jobs, the Prime Minister's threat to ban the dole for under-25s will simply push hundreds of thousands of young people, including those with young families, even deeper into poverty.
"Young people suffered most in the recession. Today the Prime Minister has pledged that they will suffer most during the recovery too."
But Mr Cameron told the conference: "Let no one paint ideas like this as callous.
"Think about it: with your children, would you dream of just leaving them to their own devices, not getting a job, not training, nothing?
"No - you'd nag and push and guide and do anything to get them on their way, and so must we."