It says the period should last as long as it takes to "prepare and implement the new processes and new systems".
Number 10 denied this meant it would be longer than the planned two years.
The document suggests the UK will abide by new EU laws and be involved in talks on future fishing quotas, but will not be able to sign trade deals without the EU's permission.
There are "only a small number of areas" where the two sides disagree, it says.
These include the status of EU nationals arriving during transition.
The transition period is due to kick in as the UK leaves in March 2019, and is intended to give time to prepare for the long-term post-Brexit arrangements between the UK and the EU, which have yet to be agreed, and to give businesses time to adapt.
The BBC's Norman Smith said some of the document published by David Davis's Brexit department would make "uncomfortable reading" for Tory Brexiteers.
It contains no "pushback" on EU demands for free movement of people to continue in the same form during the transition phase, no suggestion of a veto to block new EU laws and no power to implement new international trade deals without the EU's permission, he said.
The document's publication comes after more than 60 Eurosceptic Tory MPs set out a list of Brexit demands for the prime minister - and a day before ministers meet at Chequers to try to thrash out a way forward.
The EU has said the transition phase should end on 31 December, 2020, the end of its budget period.
But in the UK's "draft text for discussion", it says the length "should be determined simply by how long it will take to prepare and implement the new processes and new systems that will underpin the future partnership".
It adds: "The UK agrees this points to a period of around two years, but wishes to discuss with the EU the assessment that supports its proposed end date."
Full article on BBC
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