A controversial plan by the FA chairman, Greg Dyke, to introduce Premier League B teams into the Football League by 2016-17 to boost England's chances will have to face down fierce opposition from within the game if it is to succeed.

Dyke has targeted winning the 2022 World Cup but warned that English football will slide into irrelevance without major changes. But he faces a bitter battle with the Premier League and the Football League over his plan to radically reshape English football's century-old pyramid.

He hopes the attraction to big clubs of being able to follow the continental model of blooding young players in a competitive B team and the prospect for Football League clubs of a £30m cash pool per season will be enough to sway the undecided.

The four key proposals are:

• A new League Three to be introduced in 2016-17, combining the top half of the Conference and 10 Premier League B sides.

• A beefed-up homegrown players' rule requiring 13 members of the 25-man squad to have been trained in England as youngsters by 2020-21.

• A more strictly enforced work permit system that would prevent Premier League sides from having more than two non-EU players.

• A new loan system that will allow Premier League clubs to loan up to eight players to a strategic partner below the Championship.

Members of the England Commission said the national side would wither on the vine if the four-pronged plan to bring through more homegrown players was not approved in full.

The League Managers Association chairman, Howard Wilkinson, warned England would become the footballing equivalent of Cyprus and the former international Danny Mills said future managers of the national side would have to select their squads from the second or third tier.

The commission identified the "blockage" facing players aged 18 to 21 as the key issue affecting the development of young English talent. In the Premier League in 2012-13, only 32% of players were qualified to play for England, reducing to 28% among the top four clubs.

Dyke said the number of English players turning out for last season's top four sides had fallen further, from 28% on 2012-13 to 23% in the current season, and said urgent action was required.

Supporters Direct rejected the proposals and was angry at not being among the 650 stakeholders interviewed while the Football League said it was unable to accept the proposals in their current form – despite its chairman, Greg Clarke, sitting on the commission.

The plan will be considered by Football League clubs in July and will require a majority of clubs to back it, as well as a majority of clubs in the Championship.

Shaun Harvey, the Football League's chief executive, said: "It is our view that the objective of increasing the number of quality English players is laudable and while the report may not contain a solution that is acceptable at the current time, we should continue to engage with the commission to establish whether there is a solution that meets its stated objective but does not leave the Football League carrying a disproportionate or unreasonable burden."

The Football Conference, which would effectively have to be split in two to accommodate the new League Three that would include 10 Premier League B-teams and 10 non-league clubs, is also angry at the proposal. A Conference statement said: "We, like all supporters, wish to see the national team successful on the world stage but not to do it in a manner which threatens the whole existence of the pyramid, on which the solid base of our whole game is dependent."

Dyke cited support for the plan from Liverpool, Manchester City, Manchester United, Tottenham Hotspur and Stoke City. The clubs will be asked to pay around £2m each per season to Football League and Conference sides in return for running a B team. But he will have to convince two-thirds of the Premier League clubs to formally back the plan if it is to succeed.

"I think you have to distinguish sometimes between the League and the clubs. Let's remember, we invited the Premier League to sit on this. The Premier League chose not to," said Dyke, referring to the Premier League's decision not to have a representative on the commission.

"I met them last week and they said: 'Well, why didn't you consult us?' I said: 'A, you did come and give evidence and B, we wanted you on this, we wanted you to be part of it.' You must look at the distinction between the league and the clubs. A lot of the clubs want this."

But not all clubs are convinced, with some believing that pitting their brightest young talents against Conference sides would not necessarily help their technical development.

Mills insisted that the evidence from abroad suggested that B teams would not dominate at the expense of existing Football League sides and that fans would welcome the opportunity to watch promising young players from top-flight sides.

The controversial B team proposal is one of several elements of a plan designed to improve the number and quality of homegrown players available to the national team. Under the plans, clubs will also be told to incrementally increase the number of players in their squad who qualify as "homegrown" – those trained for at least 36 months in England before their 21st birthday. By 2020-21, it recommends that the majority of a 25-man first-team squad should qualify as homegrown, rather than the current eight.

Dyke has set himself on a collision course with the Premier League by concluding that the recently introduced under-21 league, due to be revamped into an under-23 league, and the £340m invested in the elite player performance plan is not sufficient to deliver the level of change required.

The Premier League chief executive, Richard Scudamore, had said the B-team idea was worth considering but concluded that the disruption to the football pyramid was not worth the uncertain gains. Yet Dyke urged clubs to be bold.

"We recognise that making changes in football is often a slow and difficult process but we urge those in the football world to consider our proposals constructively and with open minds," he said. "We urge them to balance the specific, narrowly defined concerns of their particular club or league with what will be of the most benefit to the game overall, to the development of young players and to the success of the England team."

The England manager, Roy Hodgson, welcomed the proposals and said he would "strongly advocate" the findings and recommendations. Dyke said there would be a second report later in the year to cover the areas of grassroots' facilities and coaching.

Among the ideas considered and discarded by the Commission was the even more radical option of allowing an England Under-21 side to compete in the Championship and allowing Premier League clubs to buy Football League sides as "feeder clubs".