It called the reforms, which could weaken the country's all-powerful presidency, historic, and said they would change "the entire framework of democracy on the island country".
The government announced on Wednesday that the proposal would be presented to parliament in mid-June for debate.
But whether or not the proposal will amount to anything remains unclear, with the government failing to announce any timetable for implementation of the reforms.
The move appears to have been prompted by international pressure as well as anti-government riots that broke out in September 2003 after security officers cracked down on prisoners who were protesting alleged torture, the killing of four inmates and the wounding of 25.
In response, angry mobs took to the streets of the capital, Male, gutting state buildings and police vehicles.
The Maldives, a nation of 278,000 people on 1192 coral islands about 500km off the coast of India, has been ruled by authoritarian President Maumoon Abdul Gayoom since 1978.
Anti-government riots broke out
in September 2003
The proposals include a provision to dilute the president's power by creating a post of prime minister that would take over the function of head of government, while the president would remain head of state.
They also provide for the formation and operation of political parties and the strengthening of the powers of parliament, including the introduction of proportional representation.
Currently, political parties are banned and the president is elected by referendum.
Gayoom, 65, won an unprecedented sixth five-year term in a referendum in October 2003. He was the only candidate on the ballot and secured 90.28% of the votes cast.
The proposals also aim to limit the number of terms any one person can hold the presidency and provide for women to hold the top post.
London-based Amnesty International has accused the Maldives government of "endemic torture and unfair trials," and said the September rioting "underlines people's anger caused by the blatant abuse of their human rights".