Under the proposals, the electoral college system for leadership elections - which gives a third of the votes each to the unions, rank and file party members, and MPs and MEPs - will be scrapped for a system of one member, one vote.
Individual trade unionists will no longer be automatically affiliated through the payment of the political levy by their union, but they will be able to take part in elections if they choose to join a new category of affiliated members for a fee of just £3. Labour leader Ed Miliband called for reforms last year following a row over union involvement in the selection of a Labour candidate in Falkirk.
Mr Miliband said: "This is about completing unfinished business from the past 20 years and creating a One Nation Labour Party built on the principle of one member, one vote. And it is about letting the people back into our politics: giving people a real choice and a real voice in our party; changing Labour so Labour can change our country."
A document drawn up by former Labour and union official Lord Collins will be debated by the national executive ahead of a special conference on March 1.
The Collins report reads: "Trade unions and other affiliates should continue to have a collective constitutional role inside party structures, but on a more transparent basis."