Justice Secretary Kenny MacAskill said new legislation would result in the country's eight police and eight fire and rescue services being merged into a single body each – saving £1.7 billion over 15 years.
He said the sum will be made through efficiency savings and cutting out on the need for separate administration and back office functions.
Mr MacAskill, who hopes the plans could be up and running by April 2013, said: "This is the only way to make sure we don't lose the major improvements made to police and fire and rescue services in recent years."
His plans will result in 32 local commanders – one for each council area – who will be expected to appear with other senior officers in front of local politicians to explain their actions.
One in eight councillors sit on police boards and the Government believes opening up scrutiny to all councillors will make their work more democratic.
Publishing the Police and Fire (Reform) Bill, Mr MacAskill said it would give Parliament formal opportunities to scrutinise services and create a Scottish Police Authority (SPA) and fire board to hold chief officers to account.
Staff employed by the existing forces will move to the Police Service of Scotland, which will have a chief constable appointed by the SPA, and the Scottish Fire and Rescue Service.
There will also be an independent Police Investigations and Review Commissioner to investigate complaints.
Mr MacAskill said the plans would provide a stronger connection between communities and local services. He added: "Our services will be independent, with no operational control from ministers but subject to parliamentary scrutiny."
Chief Superintendent David O'Connor, President of the Association of Scottish Police Superintendents (ASPS), called for an early appointment of the chief constable designate, and for the headquarters to be Tulliallan Castle in Fife, the home of the Scottish Police College.
Scottish Police Federation spokesman Les Gray said members were asked for comments but "we will work with Acpos and Government to ensure this is successful".
Professor John McNeill, Scotland's Police Complaints Commissioner, said the Police Investigation and Review Commissioner proposals were "bold and imaginative".
Labour spokesman Lewis Macdonald said it offered "huge potential to improve services, make them more responsive and accountable to local communities than ever before, as well as unlocking savings."
However, fellow Labour MSP Graeme Pearson, the former head of the Scottish Crime and Drug Enforcement Agency, warned the Bill lacked clarity over the authority's structure, and Tory spokesman David McLetchie branded the accountability arrangements "inadequate".