The Drug Foundation wants to remove schools' powers to expel any student younger than the school leaving age of 16.
The foundation has lodged a submission to a committee reviewing the "Tomorrow's Schools" system proposing a law change to remove the power to expel students under 16 and instead create incentives for schools to keep all students engaged in learning.
"Students who feel connected to their school are less likely to engage in many risky behaviours, including alcohol, tobacco and drug use," it says.
"Disconnection from school, especially physical disconnection resulting from stand-downs and exclusions, increases the likelihood that young people will experience harm."
The latest Ministry of Education data shows that rates of stand-downs, suspensions and exclusions have all risen in each of the past two years, reversing a decade of declining expulsion rates up to 2015.