No-one would be pursued for 3000 unsolved murders during decades of trouble before the peace accord, under his proposal.
The former Northern Ireland Secretary suggested a special judicial process whereby cases would come before a judge and those felt to be responsible could ask for the matter to be considered and then be released on licence.
It would be "even handed", applying to soldiers like those who carried out the Bloody Sunday killing of unarmed civilians in Londonderry in 1972 as well as former Republican and Loyalist paramilitaries, Mr Hain said.
Mr Hain said: "What is certain about the current situation is that victims won't get closure or justice in the vast majority of these cases because the evidence is often impossible to establish as the events happened too long ago."
However justice campaigners branded his comments "grossly offensive".
Kenny Donaldson, who represents a large victims' group in Northern Ireland, said: "It is grossly offensive to all those families who have to date been denied justice and truth."