Starmer's comments follow months of uncertainty and division on Labour's position, and are aimed at providing a springboard for party leader Jeremy Corbyn to potentially defeat the Conservatives in any new election.
He has said in the past that Britain will have to LEAVE the single market and customs union after Brexit - leaving the public utterly confused about where the party stand.
Liberal Democrats have challenged Labour to back them in a parliamentary vote to keep the United Kingdom in the European single market.
The move, announced by shadow Brexit Secretary Keir Starmer, commits the party to keeping Britain in the EU single market and customs union beyond March 2019, the date at which the United Kingdom is officially set to leave the bloc.
The spokesman said the Labour Party would propose the same "basic terms" as Britain's current relationship with the European Union during a transition period following Brexit in 2019 and after that for all options to be open.
Staying in the single market beyond March 2019 would mean the United Kingdom continues to abide by EU rules on free movement, accepts the jurisdiction of the European Court of Justice (ECJ) in trade issues, and pays money to Brussels.
LABOUR will fight to keep Britain IN the single market for years to come after we leave the EU. The shift represents a victory for soft-Brexiteers in the shadow cabinet.
Labour wanted to avoid a damaging "cliff edge" for the economy from an abrupt separation in less than two years.
"[Our proposals are] a grown-up acknowledgment that bespoke transitional arrangements are highly unlikely to be negotiated, agreed and established in the next 18 months", he said, adding, "It would enable negotiations to focus on the central Brexit issue: the nature of the new partnership that needs to be built between the United Kingdom and the EU".
Meanwhile, Brexit Secretary David Davis will meet the European Commission's chief negotiator Michel Barnier on Monday to formally open Brexit discussions. "This is challenging enough without having to negotiate separate transitional arrangements at the same time".
His comments confirmed reports in The Guardian which quoted shadow Brexit secretary Keir Starmer, who backed "continued membership of the European Union single market beyond March 2019".
The government has advocated a transitional period lasting no longer than the next election - scheduled for 2022.
Shadow Brexit secretary Sir Keir Starmer said it would be "as short as possible, but as long as is necessary". "It can not become a kind of never-ending purgatory".
Remaining in a form of customs union with the EU was a "possible end destination" for Labour, he said, but that must be "subject to negotiations".