This year's election is set to be the most hotly contested vote since the end of the 1975-90 civil war, with Syria's role in Lebanon a central issue.
Political debate over Syria's role has raged since a UN Security Council resolution last September called on foreign forces to quit Lebanon.
Syria has some 14,000 troops in Lebanon and plays a big part in domestic politics.
Opposition to Syria's role, traditionally mainly among Christians, has widened to include other political powerhouses such as Druze chieftain Walid Jumblatt, once a key ally of Damascus.
The United States and France, co-authors of UN Resolution 1559, have warned against Syrian interference in the election.
Their ambassadors routinely visit officials and politicians, urging a free and transparent poll.
The draft law, which requires parliamentary approval to take effect, divides the country into 26 small constituencies along sectarian lines.
A majority of the 128 members of the current assembly - divided equally between Christians and Muslims - are pro-Syrian.
"In the current circumstances in the country, the government ... found that there was a need for a law that shortens the distance between the voter and his representative," Information Minister Elie Firzli said.
The draft, which could be modified or changed altogether by parliament, is basically in line with what the mainly Christian opposition has demanded for a long time.
Large constituencies are seen by many Christians as giving Muslim voters, who form a 60% majority, an advantage.
Critics of small constituencies say such divisions evoke sectarian rifts.