Hospitals should sell e-cigarettes to patients and switch smoking shelters to vaping lounges, health officials have said.
Patients should be allowed to vape in private rooms and purchase e-cigarette devices in hospital shops, Public Health England (PHE) said.
Meanwhile, Government officials should help manufacturers licence e-cigarettes as medical quitting aids.
Such a move would allow GPs to prescribe the devices to their patients who are trying to stop smoking.
The calls come after PHE published its latest independent review into the evidence surrounding e-cigarettes.
E-cigarettes could be contributing to 20,000 new quits each year, they estimated.
But the number of people using the products has "plateaued" and now stands at just under three million people in the UK, according to the review, which was conducted by experts from King's College London and the UK Centre for Tobacco and Alcohol Studies, the University of Stirling and Cancer Research UK.
One reason behind the stall in uptake could be misconceptions about the levels of harm linked to the devices.
Researchers found that thousands of smokers "incorrectly" believe that vaping is as harmful as smoking and two in five smokers had not even tried an e-cigarette.
In a linked editorial, published in The Lancet, experts from PHE said: "Although not without risk, the overall risk of harm is estimated at less than 5% of that from smoking tobacco; the risk of cancer has been calculated to be less than 1%."
Following the review, PHE has made a number of recommendations about e-cigarettes, including a call for the Medicines and Healthcare products Regulatory Agency to support manufacturers to license the products as medical quit aids so they can be made available on the NHS; encouraging any smoker to switch to using e-cigarettes, and calling on NHS trusts to be "truly smoke free", and as part of this, ensuring e-cigarettes are for sale in hospital shops.
Martin Dockrell, tobacco control lead for PHE, said: "We are saying no smoking anywhere on the grounds [of hospitals], no smoking in the smoking shelter - that shelter becomes a vaping shelter.
"There are two parts to being a smoke-free hospital, one is not allowing smoking on the premises, the other is helping every smoker to quit.
"Some hospitals will decide, especially with their longer-term patients or patients who don't have a choice whether they are there or not, where it will be appropriate to have spaces indoors to have spaces where vaping is permitted.
"The strongest case for that is psychiatric hospitals because [these patients] have got the highest prevalence of smoking and the highest levels of smoking related harm.
"Single occupancy rooms are quite common in mental health trusts so that makes it very easy for people to vape in a single occupancy room without any annoyance to anybody else."
On acute hospitals he added: "It is going to be for each hospital to make their own policy but yes, we would certainly encourage them to make at least some single occupancy rooms where people can vape. Of course smoking is prohibited everywhere."
When asked about indoor communal rooms for vaping, Mr Dockrell said: "There is no reason why a hospital shouldn't designate some indoor areas where patients and visitors can vape."
Professor John Newton, director for health improvement at PHE, said: "Every minute someone is admitted to hospital from smoking, with around 79,000 deaths a year in England alone.
"Our new review reinforces the finding that vaping is a fraction of the risk of smoking, at least 95% less harmful, and of negligible risk to bystanders.
"Yet over half of smokers either falsely believe that vaping is as harmful as smoking or just don't know.
"It would be tragic if thousands of smokers who could quit with the help of an e-cigarette are being put off due to false fears about their safety."
Ann McNeill, lead author and professor of tobacco addiction at King's College London, said: "It's of great concern that smokers still have such a poor understanding about what causes the harm from smoking.
"When people smoke tobacco cigarettes, they inhale a lethal mix of 7,000 smoke constituents, 70 of which are known to cause cancer.
"People smoke for the nicotine, but contrary to what the vast majority believe, nicotine causes little if any of the harm.
"The toxic smoke is the culprit and is the overwhelming cause of all the tobacco-related disease and death."
Meanwhile experts also called for more studies into the effects of pregnant mothers using e-cigarettes
Current guidance on e-cigarettes in pregnancy states: "If using an electronic cigarette helps you to stop smoking, it is much safer for you and your baby than continuing to smoke".