The new system was unveiled as part of the government's White Paper on health. The green symbol would indicate the food is healthy, the amber would mean there is some poor nutritional content, and the red would warn consumers that the product contains either too much salt, sugar or fat.
As well as the simple traffic light option with three bands, there is also an extended traffic light system, which has five categories: red; light red for eat less often; amber; light green for eat often; and green.
There is also a key nutrient system to enable consumer to identify fat, salt, sugar and saturates in food.
The FSA will test out all options in shops, working with the food industry, with the aim to complete the research by summer of 2005. The outcome of the nutrient profiles research could help underpin some of the signposting options.
The changes come after research suggested people believed signposting would make healthy eating easier and because of increased pressure on the government to tackle obesity.
Research has shown that 75% of adults and 20% of children in the UK are officially classed as overweight, and obesity levels are rising to such an extent that the nation could reach the epidemic proportions seen in the US.
The Health Select Committee's hard-hitting report on childhood obesity earlier this year called on the government to ban all junk food advertising on TV. The food and advertising industries have strongly opposed calls for the ban, arguing that commercials are not the cause of the UK's so-called "obesity time bomb".
The government's controversial White Paper has not proposed an outright ban on junk food ads before 9pm as expected. Instead, Ofcom will have to come up with a new set of improved guidelines to regulate advertising.
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