The Welsh Rugby Union will reduce the size of the Principality Premiership for the 2012/13 season.
Plans to trim the semi-professional division from 14 to 10 teams were approved by most Premiership clubs.
However, a proposal to introduce the reforms for the 2011/12 season was rejected by the WRU board as too soon.
Clubs qualifying for the Premiership at the end of the current season will have until 22 May to inform the WRU they wish to be considered as one of the 10.
To earn a place they will have to qualify for an 'A' licence based on criteria, sign a participation agreement and will also be judged on league results across the past six seasons.
The WRU says that the identity of the 10 Premiership teams will be decided by the end of August but Welsh rugby's governing body will not reveal the identities of the clubs until the end of December.
The four displaced teams will drop into a newly-formed National Championship League, but will receive parachute payments for the first two years.
Teams from the current Swalec Division One East and Division One West will compete in the Championship League alongside the four former Premiership teams.
Division One East and Division One West will continue, with other teams moving divisions to replace those that will compete in the Championship from next season.
WRU head of rugby Joe Lydon said: "These reforms have now been confirmed and we will now need to work even harder to form a strong future for this level of rugby in Wales.
"These are radical changes and as such were never going to be simple to achieve, however it was important that they were agreed in totality and that the fundamental aims of the reforms have been recognised by all involved.
"The new formation of Premiership and National Champions League structures will ensure that the quality of rugby on show continues to improve and the funding available is best utilised.
"The 10 team Premiership will be able to flourish as an entity and will I am sure now help to underpin the player development models in conjunction with our regional partners and hopefully on into the senior national squad."
With the top six finishers in the Premiership continuing to qualify for the British & Irish Cup, a new competition will be created involving the bottom four clubs and the top four clubs from the Champions League.
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.
Within 18 months of the launch of the new structure the WRU will consider new applications for 'A' licences. If more than 10 teams meet standards, the WRU could decide membership of the Premiership on merit as well as criteria.
The Premier Division clubs chairman Chris Clarke, of Cross Keys, said: "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.
"We will all play our roles in ensuring the Premiership Division can now grasp this opportunity to improve standards.
"There are big changes ahead to achieve these reforms and we must work together to make sure the transition is as smooth as possible.
"The possibility of reform has been a matter of debate for some considerable time so now is the time for those discussions to turn into reality."