The reforms, ordered by Sheikh Mohammed bin Rashid al-Maktoum, include establishing a labour court, setting fixed working hours for domestic help and regulating the contracts of guest workers, most of whom are from South Asia.
A statement issued after a meeting with Ali bin Abdullah al-Kaabi, the UAE labour minister, said Sheikh Mohammed ordered the creation of a watchdog to monitor the conditions of the country's large foreign workforce.
Sheikh Mohammed said al-Kaabi would "take all necessary steps to organise the affairs of foreign workers... and to assure them of all the conditions of health, security and a dignified life, both in their places of residence and at work", the official WAM news agency reported.
The reforms also seek to improve the living conditions of labourers and increase safety standards in their workplaces.
Foreigners, including labourers and middle and high-income executives, make up over 85 per cent of the four million-strong population.
However, human rights groups have accused the government of the Opec oil producer of turning a blind eye to the non-payment of wages, lack of medical care and sub-standard housing for workers who form the backbone of an economy lifted by high oil prices.
Sheikh Mohammed, also ruler of the emirate of Dubai, ordered that all workers should be covered by health insurance schemes and required the labour ministry to create a mechanism to prevent delays in wage payments.
The statement said Sheikh Mohammed warned those who abuse labourers of "legal action that would act as a deterrent", but did not elaborate.
The US, which is negotiating a free trade pact with the UAE, is pressing the Gulf state to apply international standards to its workforce.
The UAE has vowed to set up unions for workers, penalise firms that do not pay employees on time and crack down on abuse. But it also threatened to deport workers who start protests.
Dubai, the Gulf's tourism and trade hub, is undergoing a huge building boom.
Employers are often accused of failing to pay promised wages to building workers, and strikes and sometimes violent protests have erupted.