Cycling and walking should be the norm for all short journeys, experts say.
The National Institute for Health and Clinical Excellence said people should shun their cars if a trip could be done in 15 or 20 minutes on foot or bike.
It said the approach was needed to combat the "silent epidemic" of inactivity posing a risk to the health of people in England.
The advisory body called on councils to do more to make walking and cycling an easier option in local communities.
It said their new responsibility for public health, which the NHS will hand over next year under the government's reform programme, offered a "unique opportunity" to make a difference.
The National Institute for Health and Clinical Excellence (NICE) said councils should look to introduce bicycle-hire schemes, car-free events and better cycle-route signalling and maps.
Walking routes should also be better highlighted, with signposts indicating the distance and time it takes to walk to local destinations.
Schools and workplaces should also be encouraged to get more pupils and staff cycling and walking.
NICE has previously given its backing to 20mph speed limits in certain areas.
The group said local authorities needed to take action, as the levels of inactivity were costing lives.
A recent report in the Lancet said inactivity was now causing as many deaths as smoking.
Latest figures suggest six in 10 men and seven in 10 women are not doing the recommended levels of physical activity.
The figures are little better for children.
In particular, levels of cycling and walking are falling - with England lagging well behind other European countries, such as the Netherlands and Denmark. Only 11 minutes a day on average is spent cycling or walking.
Prof Mike Kelly, from NICE, said: "As a nation, we are not physically active enough and this can contribute to a wide range of health problems."
Dr John Middleton, vice-president of the Faculty of Public Health, said cycling and walking needed to be made an "easy option".
"It's not necessarily about spending more money on transport, but investing existing money in our health by rethinking the way in which budgets are being spent."
Local transport minister Norman Baker added the new duty on councils should make it easier to ensure transport, planning and health officials worked together to help change the way people travel.
"We want to see more people walking and cycling," he added.