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."
The FA's head of elite development Dan Ashworth, meanwhile, remains confident in the coaching processes in place, which centre on the new facility at St George's Park.
"We are as good as anybody for consistently qualifying for tournaments across the age groups, from seniors down to under 17s - what we are not very good at is getting out of the groups or through the knockout stages," he told Sportsweek.
"That could be down to a number of factors - through our game style, with a high-pressing game then by the latter stages our players are not perhaps physically as right as other countries. It could also be psychological factors, and that is something we will be looking at.
"I would be disappointed if we did not start seeing a real ingrained game-style philosophy approach to talent identification, psychology and all the other things, and a real alignment of all our disciplines across all the ages in 18 months' time."
Former Premier League chief executive Rick Parry is in no doubt where the blame lies over most of the games' ills.
He told the BBC's radio show: "The FA need to be bolder, they are the governing body - do they really want to govern?
"You look at the big issues in recent years, where you would expect the FA to be taking a position where the FAs across Europe do, and I think ours has tended to be a little bit on the back foot and silent."
Parry added: "We should not be trying to dumb down the Premier League, it is not about trying to reign that in, it is more a case of can the FA now pull itself up by its boot straps and catch up?"