"The people have sent a clear message to us. We are aware and we repent."
The reforms will vastly increase the number of Umno members who will be able to vote in party elections, and allow more party members to contest top jobs.
The changes will slash the influence of traditional party warlords who have benefited from Umno's previous culture of patronage, analysts say.
"This move is historic because no other leader, especially one in power, has been willing to change the system that placed them in power in the first place," Hishamuddin Hussein, Umno's vice-president and Najib's cousin, told party members.