Noye, 70, was convicted of murdering 21-year-old Stephen Cameron in an attack on the M25 in Kent in 1996.
He went on the run but was arrested in Spain two years on.  He was sentenced to life, with a minimum of 16 years.
The recommendation comes after Noye won a High Court challenge in February against a decision refusing a move to open prison conditions.
A Parole Board spokesman said: "We can confirm that a three-member panel of the Parole Board has not directed the release of Kenneth Noye.
"However, they have recommended that he be transferred to open conditions.
"This is a recommendation only and the Ministry of Justice will now consider the advice and make the final decision."
Under current legislation, Noye will be eligible for a further review within two years, on a date set by the Ministry of Justice.
One of Britain's most notorious criminals, Noye was also convicted of conspiring to handle gold from the 1983 Brink's-Mat robbery and conspiring to evade VAT payments.
A spokesman for the Ministry of Justice said: "The independent Parole Board has made its recommendation.
"We will carefully consider this and make a decision in due course."
In 2015, the Parole Board recommended Noye be transferred to an open prison after it declined to order his release.
But the then Justice Secretary Michael Gove rejected the recommendation.
After a challenge by Noye in the High Court, Mr Justice Lavender quashed the refusal decision.
He said in February: "It will be for the current Secretary of State to take a fresh decision whether or not to transfer the claimant to an open prison."
Road-rage killer Kenneth Noye has been recommended for transfer to an open prison, the Parole Board has said.