Erdogan said that the ubiquitous use of private security firms to guard public buildings like courthouses but also hospitals and stadiums should be outlawed.
"I will suggest to my friends (the government) that they remove private security guards altogether (from public institutions)," Erdogan said.
"I believe it would be a historic decision," the Hurriyet daily quoted him as saying in a closed briefing on the presidential jet as he returned home from Romania.
The two gunmen who took the prosecutor hostage had reportedly entered the giant Istanbul Caglayan Palace of Justice -- guarded by private security guards -- disguised as lawyers.
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"Turkey has its own police department. It should set up protection teams for courts. Private security units should be abolished," Erdogan said.
"Not only courthouses, but stadiums and hospitals should be left to the police," he said. It was not clear if he was calling for a blanket ban on private security guards.
In further violence Wednesday, police in Istanbul killed an armed woman linked to the DHKP-C after she tried to storm the police headquarters in Istanbul
According to official statistics, Turkey has approximately 270,000 private security guards who are employed in the public and private sectors.
Erdogan's comments came amid growing accusations from opponents that the country is turning into a police state, after the Turkish parliament passed draconian legislation in March that boosts police powers.