The recommendations, which also include the Scottish Government investing at least a quarter of its annual advertising budget in the press, come as part of a report published on Wednesday by the Public Interest Journalism Working Group.
The group was set up by the Scottish Government to consider the long-term sustainability of public interest journalism in Scotland and recommend how it can be better supported.
Members include representatives from local, independent and national media in Scotland.
The report’s central recommendation calls for the creation of an independent Scottish Public Interest Journalism Institute that would administer grant funding and donations for public interest journalism projects and publications, while being self-funded after initial backing by the Scottish Government.
It would also work to improve media literacy, diversity in the media, and undertake research and offer training opportunities. The institute would be independent of government.
The group also backs a move for the Scottish Government to invest at least a quarter of their annual advertising and marketing budget with public interest news providers, to be audited each year by Audit Scotland.
This would be alongside tax incentives for businesses who choose to advertise with newspapers.
The report also calls for the government to "embed media literacy” in the curriculum, as well as providing a voucher scheme for older teenagers to access public interest journalism for free.
Giving locals the option of purchasing local newspapers at risk of closure, in line with the community buy-out system in place for land and property, should also be examined by the Scottish Government.
Rachel Hamada, from the Bureau of Investigative Journalism, who is also a journalist director of The Ferret investigative journalism platform and a member of the working group, said the recommendations demonstrated a “real chance for Scotland to lead on this”.
She said: "Our hope is that the Scottish Government, which set up this working group, will see the value of supporting initiatives that will allow a rigorous and pluralistic news media to thrive while also retaining the critical independence necessary for scrutinising power at a national and local level.
"We think this is a real chance for Scotland to lead on this at a time that public interest media, a key pillar of democracy, is under threat globally."
"We're particularly hopeful that proposals for a new independent grant-making body could enable the development of a news media sector that is truly representative of Scottish communities, their diversity and their news needs.
"We have also recommended that communities can be supported to buy out local newspapers that are under threat.
"Local communities that have access to reliable and timely news on the issues affecting their lives are far more likely to be politically engaged as voters and volunteers, and are much less susceptible to misinformation and political polarisation."
The Scottish Government’s culture secretary, Angus Robertson, said: “A strong and vibrant news sector is essential to a well-functioning democracy.
"I’d like to thank the working group for the recommendations, which we’ll consider carefully before responding.”