Mr Erdogan said parliament would debate whether to reduce the threshold for a political party to enter parliament to 5% of the national vote, or even eliminate the barrier completely.
However, the leader of the pro-Kurdish Peace and Democracy Party (BDP) said the proposals failed to go far enough to advance peace with the militant Kurdistan Workers Party (PKK), which this month halted its withdrawal of fighters from Turkish territory on the grounds the government was not moving swiftly enough to see through its end of the deal.
The current 10% threshold, among the highest in the world, has kept pro-Kurdish groupings outside of parliament and has been one of the main grievances of Turkey's Kurds who make up around a fifth of the country's population.
Mr Erdogan said the so-called "democratisation package" would also allow for education in languages other than Turkish at non-state schools, another long-held demand by Kurdish politicians. He said: "Today our country, our nation, is experiencing a historic moment. We are taking important steps to make Turkey even greater.
"Our people's greatest wish is to strengthen our domestic peace, further our social cohesion and solidarity and fortify our tranquillity."
While Mr Erdogan reiterated the proposed reforms were not directly linked with efforts to end the 29-year conflict with the outlawed PKK, the changes are largely viewed as an effort to advance the flagging peace process.