Jeremy Corbyn has promised to listen to Labour members' calls to keep the UK in the EU single market - but warned it could hamper the government's ability to protect jobs and invest in industry.
The Labour leader said EU restrictions on state aid and pressure to privatise sectors like rail could cause problems.
He also predicted "a lot of people" would continue to come from the EU to work in the UK after Brexit.
Mr Corbyn was speaking on day one of the Labour conference in Brighton.
More than 40 senior Labour figures, including 30 MPs, have signed an open letter, published in the Observer, urging Mr Corbyn to commit to remaining in the European single market and customs union after the UK leaves the EU.
Labour has already said it would keep the UK in both agreements during a transitional period.
Theresa May has suggested that period could last about two years, but speaking on the BBC's Andrew Marr Show, Mr Corbyn said it should last "as long as necessary".
It is "impossible" to say at this stage how long it would be, he argued.
'Clean break'Asked about his plans beyond this period, Mr Corbyn said the "important priority" was seeking tariff-free trade access to the EU's markets, and that it was necessary to "look very carefully" at the terms of any trade deal to avoid restrictions on state aid, citing the UK's steel industry as an example.
"We need to be quite careful about the powers that we need as national governments," he said.
The customs union is the EU's tariff-free trading area, which imposes the same taxes on imports from certain countries outside the union.
The single market also includes the free movement of goods, services, capital and people.
The letter urging commitment to the single market was signed by both Blairite and left-wing MPs, along with some prominent trade union leaders.
"The supposed benefits of a clean break with the EU are a fantasy," it said.
"The economic impact of leaving the single market would hit the most vulnerable in our society hardest.
"Labour should commit to staying in the single market and customs union - ruling out no options for how to achieve this."
On the issue of free movement, Mr Corbyn said he understood "the importance of workers moving from one place to the other", but some employers had "grotesquely exploited" the system to pay EU workers very low wages.
"That has to stop. But we have to recognise that in the future we're going to need people to work in Europe, and people from Europe are going to need to work here. There's going to be a lot of movement."
'New strength'Although Labour did not win the general election, Mr Corbyn will tell delegates to the party's biggest ever conference that they have set the political agenda after making gains in it.
He will unveil, or reiterate, policies that will have wide approval across his party, from recruiting more police officers to lifting the public sector pay cap and alleviating student debt.
"We have changed the political centre of gravity. We are now the political mainstream and have the chance to transform our country," he wrote in the Observer.
"To do that we must use our new strength inside and outside Parliament to challenge the Conservatives at every step - and prepare to form a government to change Britain when the next election is called."