The Premiership clubs voted in favour of the proposal by a majority at a meeting this week where they debated a presentation on the reform plans which had been delivered earlier by the WRU Head of Rugby, Joe Lydon
The changes will reform the Principality Premiership Division from 14 to 10 teams chosen on the basis of set criteria.
It is proposed that the four teams displaced from the division will move directly into a newly formed National Championship Division which will form the top tier of the Community game in Wales.
Below that new league the existing SWALEC Division One East and Division One West will continue.
A new competition will also be organised involving the four clubs which are not participating in the British & Irish Cup in the new Premiership Division and the top four clubs from the National Championship Division.
The proposals drawn up by WRU Head of Rugby, Joe Lydon's department have also been presented to and approved by the union's Regulatory and Game Policy committees, the WRU Executive, the National Squad Management team and the four Regional Organisations along with their representative body Regional Rugby Wales.
If the plan is ratified by the WRU Board the ten teams which have achieved the criteria grades to form the new Premiership Division will be announced before the start of next season.
The radical changes have been drawn up following of a review which looked at funding, player numbers and quality along with competition structures.
WRU Head of Rugby, Joe Lydon, said: "An enormous amount of work, including consultation with all the major rugby stakeholders has gone into formulating this proposal. Following the support of the various groups we can now look forward to seeking ratification of the full Board of Directors of the WRU.
"This proposal may be viewed by some as radical reform and I fully appreciate the sensitivities of the issue so I admire the robust and realistic view the clubs are taking to help us deliver this reform.
"The new formation of Premiership and Championship League structures will ensure that the quality of rugby on show continues to improve and the funding available is best utilised.
"The reform includes a revised funding model to ensure enhanced on and off field performance.
"The creation of a new National Championship Division offers an exciting new level of rugby for both players and supporters to enjoy.
"Together we can make changes which will protect and develop our national sport and engender new interest across the whole of Wales whilst ensuring that this integral tier of welsh rugby provides a stepping stone to Regional and International rugby.
"Sometimes tough decisions have to be taken in the best interests of our national sport and we will continue to work hard to ensure the transition is as smooth as possible for all concerned."
The chairman of the Premiership Division, Chris Clarke, of Cross Keys said: "These are radical reforms, but we realise they are necessary to ensure the division is sustainable and can prosper as a keystone of the elite game in Wales.
"We have all been faced with the financial realities sport is not immune from these days and this reform will help us meet those challenges.
"Of course there are clubs which will be bitterly disappointed at losing their Premiership status, but we have to be realistic and make tough decisions in the interests of Welsh rugby.
"The important thing is that the game will progress and the top of the sport in Wales will now have a platform from which to grow from strength to strength."
Details of the plan and the rules associated with membership of the reformed Premiership Division and the Championship Division will be agreed in the weeks ahead.
Clubs seeking to be one of the ten remaining Principality Premiership teams will be able to apply for the new status.
They must achieve an A licence granted by the WRU and based on defined criteria and an analysis of their results across the past six years in either the Premiership or Division One will be taken into account.
The new Premiership Division clubs will all sign a Participation Agreement and Rugby Charter which will safeguard rugby, player welfare and the commercial strategies of all the teams involved. Under the plan each of the four regional organisations will also be aligned, with a minimum of two and a maximum of four Premiership Division teams across the geographical regions.
Under the proposals a revised funding model will see enhanced financial and resource support provided to both newly formed Premiership Clubs and those displaced to the new National Championship Division