After two season's which ended with finals in which Leinster Lions defeated Munster in 2002 and Munster beat Neath in 2003, the 12 team tournament will for the first time be played on a 22 game home and away basis with all participating teams appearing in one league.
A new initiative will be the launch of a knock-out cup competition played over four independent weekends.
The teams that will compete in the 2003/2004 Celtic League and Celtic Cup will be:
IRELAND: Munster (champions), Connacht, Leinster Lions and Ulster.
SCOTLAND: Borders, Edinburgh Rugby and Glasgow Rugby.
WALES: Bridgend/Pontypridd Region, Cardiff Region, Ebbw Vale/Newport Region, Llanelli Region and Neath/Swansea region.
League matches will begin early next season, with the final round taking place in May.
"The accord we have agreed for the Celtic League to be played on a proper home and away basis from next season is a huge step forward for the tournament," said WRU chief executive David Moffett.
"From a Welsh perspective, the announcement that our five new regional teams will be competing in a full and proper fixture list next season is great news. It means there will be enough quality rugby throughout the season to hone the senior players, develop the younger talent and give the fans plenty of meaningful action.
"It means there will be top-class, professional club rugby being played throughout the Rugby World Cup, giving the teams greater continuity than in the past. It also means that the international coaches will be able to see their players all the way up to a few weeks before they traditionally leave on summer tours.
"As a group, the Celtic League Association has taken a huge step forward with this agreement. We have also ironed out all issues regarding finance for next season."
Bill Watson, Chief Executive of the Scottish Rugby Union, said: "We have sought for some time to see the Celtic League expanded into a season long competition. The restructuring of the game in Wales has enabled the Celtic countries to achieve our objective in a hugely meaningful way.
"Our competition next season will deliver more meaningful games of rugby, raising the intensity of every game played. I know the three Scottish teams will welcome this very significant development."
Philip Browne, Chief Executive, Irish Rugby Football Union said: "We are very pleased that the new structure of a home and away Celtic League has been agreed, which allows us to develop the competition to its full potential. The introduction of a knock out Celtic Cup competition is a further fillip which I hope will prove to be attractive to broadcasters, sponsors and the rugby public."
The Celtic League was launched in the summer of 2001. The inaugural season saw 15 teams (4 Irish, 2 Scottish and 9 Welsh) play in two Pools, one of seven and one of eight. The teams only played each other once and the top four teams from each Pool progressed to a knock-out phase.
This season, the tournament featured 16 teams, with the arrival of a third Scottish team, the Borders. Once again, the teams were split into two Pools with the top four sides in each Pool going on to contest a knock-out phase.
Leinster Lions defeated Munster 24-20 in the first Celtic League final at Lansdowne Road in front of a crowd of 30,000, while this season Munster were 37-17 winners over Neath in front of 30,076 at the Millennium Stadium on 1 February.