It rejected taking other social and lifestyle issues like obesity into account over access to treatment.
Charities representing older people said the recommendations were outrageous and sent out mixed messages.
Nice looked at whether lifestyle issues were relevant to how effective a drug will be and the effect on value for money.
Its draft recommendations said there was no case for discrimination on the basis of gender and sexual orientation.
It also said discrimination against patients with conditions which are self-inflicted should be avoided, effectively ruling out restrictions on access for people who smoke or are obese.
Nice is in danger of sending very mixed messages, and it is older people who will lose out says Age Concern.
However, the recommendations say that where age is an indicator of benefit or risk, age discrimination is appropriate.
Michelle Mitchell of Age Concern said this "should never happen. Nice is in danger of sending very mixed messages, and it is older people who will lose out. They already suffer age discrimination in health and social care as it is."
Ms Mitchell said a survey of GPs by the charity had found that 80% thought age-based rationing already happened in the NHS.
Stephen Jackson, professor of clinical gerontology at King's College, agreed age discrimination was already happening.
He said certain courses of treatment may well pose greater risks for older patients, but that it should be up to them to decide whether to take that risk.
But a spokesman for Nice said age discrimination could work both ways, with some treatment being made available only to older people.
He cited some flu drugs, which are only given to over 65s.