The Children's Commissioner says the Government should consider paying parents to keep babies at home instead of in care.
The results of the inquiry by commissioner John Angus into non-parental care of children aged under two was made public on Monday.
Mr Angus called for higher minimum standards for the care of babies and toddlers in early childhood services.
The inquiry shows the number of under two-year-olds in such care has grown faster than any other group in the past four years.
The report suggests requiring one teacher for every three under-twos, instead of the current minimum of one for every five.
However, Mr Angus has also suggested that the Government review its policy to encourage parents to look after young children themselves, especially for children in their first year.
The report recommends tipping the policy and funding balance in favour of parental and extended family care, such as by introducing more flexible and extended paid parental leave arrangements.
Mr Angus believes parental care is best for very young children, but parents should not feel bad if that is not possible.
He says good quality childcare is not contrary to the best interests of children aged under two, but babies should not be in care for more than two or three days a week.
The commissioner has also recommended raising the minimum safeguards for children under two years old.
Mr Angus says there are questions about the impact of long hours of non-parental care, and the quality of that care has to be high.
The Government has welcomed the report, but says many of its recommendations would raise costs for early childhood services and parents.