The legislation is intended to save both struggling industries, which for years have fought each other.
"From the outset, this process has always been about rejecting the conventional wisdom that Atlantic City, the Meadowlands and the horse racing industry could not be brought together," said Democratic Sen. James Whelan, a former Atlantic City mayor.
"This is a comprehensive approach that will protect the jobs our casinos and racetracks support, and prove that solutions do not have to come with winners and losers," he said. "If we act quickly to get this plan in place, everyone will win."
Democrats in the Senate say they would legalize Internet betting from within New Jersey and let voters decide at the polls whether to approve sports betting.
They also want to offer new types of bets on horse races, expand the state's breeding development program and reduce expenses at the Meadowlands and Monmouth Park.
Other plans include giving the Casino Reinvestment Development Authority zoning and planning power over Atlantic City's casino zone and allow casinos with as few as 200 hotel rooms.
Some of the plans are already included in bills that have been introduced, such as expanded off-track betting outlets, and the smaller casinos bill. Others will be introduced Nov. 8.
Senate leaders said they hoped the measures could be enacted by the end of the year.
The measures came in response to the recommendations of a task force appointed by Republican Gov. Chris Christie to chart a future for the state's casinos and racetracks as both face withering competition from neighboring states, as well as the continuing sluggish economy.
The task force recommended the state end its multimillion dollar subsidy of horse tracks and refuse to allow slot machines at the tracks.
Christie called for greater state intervention in Atlantic City, particularly in the casino zone, but has left the details to lawmakers. Last week, the state took authority over Atlantic City's municipal finances.
Michael Drewniak, Christie's press secretary, said the governor is considering the Democrats' proposals, but declined further comment.
They include some things that Christie explicitly asked for when he unveiled the panel's recommendations in July, including "updating and modernizing" the Casino Control Act to make state oversight less burdensome to casino operators.
It also would streamline operations at the Meadowlands and Monmouth Park racetracks. The unspecified savings from reduced expenses at the tracks and from state casino regulators would be used to support horse racing and casino initiatives.
Incentives to the horse industry would include: enhancing the New Jersey Sire Stakes and Breeding Development programs to allow horse breeders to remain in New Jersey; expanding the current system of parimutuel-only betting to include exchange and single-pool wagering; and opening additional off-track betting facilities.
State Senate President Stephen Sweeney said Christie's task force recommendations were "a major stick in the eye to the horse racing industry. It would have meant turning out the lights and losing the 13,000 to 16,000 jobs they support. This is designed to make sure the casinos and the racetracks both survive and thrive."