Ed Miliband wants to scrap the system which gave him a thin victory over brother David in the race for the Labour leadership and replace it with a 'one member, one vote' election.
The proposals will "let people back into our politics" and complete 20 years of unfinished business, Mr Miliband said.
He told The Guardian: "These are the biggest changes to who can become involved in the Labour Party since probably its formation."
Under the current electoral college system for leadership elections, a third of votes go to trade unions, with the same proportion for party members, MPs and MEPs.
The unions will keep their collective voice at party conferences, with 50% of the vote, and their quota of seats on the national executive, although Mr Miliband has pledged to look at this in the future.
Under changes announced by Mr Miliband last year, individual trade union members will no longer be automatically affiliated with the party through the payment of a political levy.
They will be able to take part in elections if they chose to become an affiliated member for a fee of £3, Mr Miliband revealed in the interview.
The electoral college system gave Ed a close victory over David in 2010 The party hopes this will encourage them to become more involved in campaigning and provide a new source of activists.
The reforms were sparked by the controversy surrounding the selection of Labour's candidate in Falkirk.
The Unite union was accused of signing up members in the constituency to try and influence the outcome. An internal inquiry found no evidence of wrongdoing, but some have said it did not have all of the facts.
While he hailed the reforms as a "great advance", Mr Miliband admitted the changes are a risk. There are warnings altering the automatic levy will see the party suffer a significant drop in funding.
To ease these concerns the changes will be implemented over five years.
A decision on whether to adopt the reforms will be made at a special conference in London on March 1.
Some MPs have voiced their unease with the plans. There are warnings the proposals will increase the power of unions, who could try and persuade affiliated members to back their preferred candidate.
"This would be disastrous," one former minister told the Daily Mirror.
"It could be the death of the Labour Party."
:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.
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