Speaking days after new FA chairman Greg Dyke highlighted the "frightening trend" of reduced numbers of domestic players in the top flight, Hoddle claimed it was time to "show some teeth".
English players made up only around 32 per cent of teams' starting line-ups in the Premier League last season and Hoddle fears that figure will only continue to dwindle.
Any attempt at a quota system would be hampered by European employment laws but Hoddle insists the matter still must be explored.
"We all know it is difficult, because at the end of the day the rules are the rules and the Premier League will just abide by that," he told BBC Radio 5 Live's Sportsweek programme.
"We have got to show some teeth. If it is a maximum of five (foreign) players and the rest have to be English, whatever we can do with the rules, but it always seems they come up against a brick wall.
"Maybe the government could be helping that, but it is a bigger, deeper issue for politicians and the FA to get together, because this 32 per cent is going to get less and less each year."
Hoddle, who guided England through to the knockout stages of the 1998 World Cup, believes quality coaching from a young age remains the answer.
He said: "We have to focus in on English talent and be bold enough to say if foreign players are coming in to fill our clubs aged 17, 18 or 20, then we have to build a 10-year plan which allows these lads being taught by the best coaches - being paid good money, which is what the Dutch did - and bring them through where they master the ball first.
"There is definite talent out there, we just need to source it."
Meanwhile Rio Ferdinand believes the massed ranks of foreign players in the Premier League is "disgraceful."
The Manchester United defender, who came through the ranks at West Ham, told The Mail on Sunday: "Having so few English players in the Premier League diminishes the English team, of course it does.
"Look at the Manchester City game recently against Newcastle. There was barely an English player on the pitch, three out of 22 starters.
"That is a disgrace.
"If you look at it and ask whether there should be a stipulation that you have a minimum number of players who are English, even just in your squad, I think that should happen.
"If you look at a lot of teams, there are England players who aren't playing for their clubs - yet we're hoping to go to a World Cup and do well!"
Although it would be nigh-on impossible to implement, Ferdinand would look to copy the example of Turkey, adding: "I would do what Turkey do, and have limits.
"In that country, clubs can have a maximum of 10 foreign players on the books, and no more than six in any 18-man matchday squad.
"I know that European laws won't let a legal quota happen. So you can't do that. But if you want to protect English football and its heritage and its future, something like that has to be done."
- Sports & Recreation
- Premier League