He said there must be "business as usual, life as normal" for Britons as the UK exits the EU.
"Many things would look similar" the day after Brexit - on 29 March 2019 - as the UK moved gradually towards a new relationship with the EU, he said.
But he added the transition must end by June 2022, before the next election.
Meanwhile, the Guardian has reported that Malta's PM Joseph Muscat has said he is "starting to believe that Brexit will not happen".
The UK is due to leave the EU at the end of March 2019, but there has been increasing talk of a "transitional" or "implementation" stage to smooth the Brexit process, before a new long-term relationship with the EU is in force.
It could mean a period during which some EU rules would continue to apply to the UK after it has technically left the bloc. Newspaper reports have suggested these could include allowing the free movement of people for a period, something that was seen as a key issue in the vote to leave the EU.
Mr Hammond also appeared to acknowledge that it could mean new trade deals with non-EU countries could not be signed during that period, but said it would "take some time for us to negotiate" them and the important thing was to be able to "get started on that process".
The chancellor told BBC Radio 4's Today programme the length of any transitional deal would "be driven by technical considerations - how long it will take us to put the necessary arrangements in place".
"People have talked about a year, two years, maybe three years... I think there's a broad consensus that this process has to be completed by the scheduled time of the next general election, which is in June 2022."
Beneath the surface, Chancellor Philip Hammond had been arguing for a transitional arrangement to avoid choppy waters in 2019. There is no longer any dissent in the ranks - that concept has been agreed by the cabinet.
In return, the chancellor has acceded to demands by ministers who voted to leave the EU that any transitional phase must be completed by the scheduled date of the next general election - June 2022.
But have other disagreements so far escaped the political sonar?
On Thursday, Immigration Minister Brandon Lewis said it was a "simple matter of fact" that EU free movement rules would not apply after 2019.
Mr Hammond said that was right because freedom of movement was an EU concept and the UK would leave the customs union and single market on 29 March 2019.
But he said the question was "what happens next" so that British people and businesses could "get on with their lives" without "massive disruption".
"On the first day after we leave the European Union, of course many things will look similar because that is the starting point."
He hoped that "in the immediate aftermath... goods will continue to flow across the border between the UK and the EU in much the same way as they do now".
On whether EU citizens would continue to be free to enter the UK, he said it would be "some time before we are able to introduce full migration controls between the UK and the European Union".
"That's not a matter of political choice, it's a matter of fact. We have to put in place quite a lot of new infrastructure, we will need a lot of new people, we will need new IT systems... This is going to take a while to deliver."
But he added: "What people in this country will want to know is that the day after we leave the European Union they are still able to go about their business.
"They will want to know that when they go to the supermarket, French and Spanish produce will be on the shelves, in the normal way. They will want to know that if they want to travel to Europe or go on holiday they will able to go to the airport, get on a plane and fly to their destination.
"The government's job is to make sure that our economy can go on functioning normally, that people can go about their businesses as usual ... that is our focus."
Some of Mr Hammond's colleagues who campaigned for a Leave vote have accepted that an "implementation period" in which the UK moves from EU membership to a new deal with the EU is likely.
But International Trade Secretary Liam Fox said earlier this week it must not "drag on" beyond the next election - newspaper reports had suggested it could last four years.
The EU said it was too soon to discuss a transitional deal. A European Commission spokesman said: "At this point in time we are about to discuss the specifics of separation and once this is done to the satisfaction of everyone, we may move to the second step."
Shadow Brexit Secretary Sir Keir Starmer said Labour had been calling for "appropriate transitional arrangements" to put jobs and the economy first.
"The chancellor now appears to accept this. However, in light of the clear divisions this week within the cabinet, I hope the chancellor was not merely speaking in a personal capacity," he said.
"I also hope that this is the final burial of the flawed proposition that 'no deal' is a viable option."
Source: BBC Business News