Of the half a million people who die in Britain each year, 60 per cent die in hospitals – but only eight per cent would choose to die there, the study by Demos found.
Instead, 60 per cent would rather die at home surrounded by friends and family, in familiar surroundings.
Their report, Dying for Change, concluded that an annual investment of 500m a year, which represents 2.5 per cent of the NHS spend on end-of-life care, would provide community services to allow half of people to die at, or near, their homes.
Report co-author Charles Leadbeater said: "It's not just that we're living longer – part of this means that people are dying over a longer period, losing first their memory and then their physical capacities in stages.
"As things stand we spend very large sums on services, especially in hospitals and care homes, which do not allow people to die in the way they would want."
The Demos study showed that 200,000 people a year who die in hospital should instead be dying at home.
In Government plans published last month, it was stated that everyone should be given a "choice offer" with proper support in place to make sure they die where they want to.
They recognised there was a long way to go before such a move was brought in, with a review being due in 2013 to decide when the "choice offer" could be introduced.