It could bring economic benefits of £2.4bn annually, research shows, says Schools Secretary Ed Balls.
Those who refuse to stay on - either in school, college or on a job training scheme - will face spot fines of £50 and possible court fines of £200.
The legislation will mean all teenagers in England continuing in some form of education until they turn 18.
Those who opt out of academic courses will be offered places on apprenticeship schemes to gain workplace skills.
Parents will have a duty to help make sure their children attend classes under the plan.
Employers will also be required to let young people attend training for at least one day a week.
Schools Secretary Ed Balls has acknowledged he faces a "big task" to convince teenagers to support the idea.
He said: "These are the biggest reforms in education, training and skills in a generation and it is estimated that raising the participation age alone will potentially benefit the economy by around £2.4bn per year group.
"By 2015 every young person will be in some form of education or training until the age of 18 and there will be a range of free training beyond that.
