Speaking to BBC staff, the BBC's director general Mark Thompson confirmed that "compulsory redundancies could not be ruled out".
However, Thompson dismissed the idea of shutting down any core BBC services, such as digital channels BBC Three or BBC Four.
"The danger of closing a service is you face losing audiences critical to the BBC," he told staff.
Various proposals have been put forward for approval by the BBC Trust as part of the corporation's nine-month consultation, dubbed Delivering Quality First (DQF).
The key proposals include:
- The elimination of BBC Two's daytime budget
- BBC Radio 4's underlying programme budget being protected
- A 15% reduction in BBC Sport budget
- A reduction of 3% in BBC One's budget
- Extra investment in children's channels
- Small reduction in scope of BBC News
- Reduction in entertainment and acquisitions
- Reduced spend in off-peak programming, particularly overnight shows
BBC Three will move to the new BBC North base in Salford, as the BBC prepares to vacate its headquarters in West London, including Television Centre and White City. There will also be wide-ranging cuts at BBC Radio, with the exception of BBC Radio 4.
Around £400m of the savings by 2016/17 will come from productivity streamlining, with £205m coming from "scope", essentially programmes and services.
The cuts are required due to the BBC's new licence fee settlement agreed with the government a year ago, which froze the TV licence fee at £145.50 until 2016-17, effectively cutting the corporation's income by 16% in real terms.
Thompson said earlier in the year that the BBC would target 20% savings across its operation, with the extra 4% to be reinvested in new content (particularly comedy and drama) and digital technologies.
The BBC is also preparing for new financial obligations under the settlement, including the BBC World Service, BBC Monitoring and funding for local TV and broadband services.
Under the Delivering Quality First proposals, BBC Two's existing daytime schedule will be replaced with international news and current affairs, along with repeats in the afternoon.
BBC Three and BBC Four will be "refocussed" to play a "supporting role" to flagship networks BBC One and BBC Two respectively. It is expected that their budgets will be reduced by around 9-10%.
Children's programmes such as Blue Peter will be dropped from BBC One and moved to children's channels CBBC and CBeebies after the digital switchover completes in 2012.
On radio, there be greater sharing of news operation between the networks, while Radio 5 Live will be refocussed on a "core output of news and sport".
Original drama, live music and concerts on Radio 3 will be cut at lunchtime, while the BBC's orchestras and singers will be "reviewed".
Lord Patten, the chairman of the BBC Trust, said: "The BBC is far from perfect, but it is a great institution and, at its best, a great broadcaster. We have a tough and challenging new licence fee settlement, but it should still be possible to run an outstanding broadcaster on £3.5bn a year.
"The Trust's view has been clear from the start of this process - the BBC must look to run itself as efficiently as possible before we consider cutting services.
"Over half of the savings announced today will come from changes to operations, but there will need to be some changes to services, and we now need to test BBC management's proposals for this. We agree with the direction that the Director-General has taken, but we want to hear what the public think, as it is ultimately their BBC."
In a statement, Thompson added: "This is a plan which puts quality and creativity first. It's a plan for a smaller BBC, but a BBC which uses its resources more effectively and collaboratively to deliver a full range of services to the public.
"The plan meets the savings target we agreed in last year's licence fee settlement, but also identifies nearly £150m per year to invest in new high-quality output and in the platforms and services of the future.
"But it is a plan which also means stretching efficiencies and significant job losses. It's my judgement that this is the last time the BBC will be able to make this level of savings without a substantial loss of services or quality or both."
The BBC Trust is now running a public consultation on the proposals. It has also launched two service reviews of English local radio and the Asian Network.