Deputy PM Nick Clegg has unveiled plans to have fewer MPs and hold a referendum on the voting system before the next election.
In a statement which included plans for fixed-term parliaments, he said UK democracy was "fractured", with some votes counting more than others.
He also changed the number of MPs required to vote to dissolve Parliament from 55% to 66%, after heavy criticism.
Labour attacked boundary changes as "gerrymandering".
In a wide-ranging statement, Mr Clegg confirmed the government planned to introduce legislation for five-year fixed term parliaments and to hold a referendum next May on changing the Westminster voting system from first-past-the-post to the Alternative Vote (AV), where candidates are ranked in order of preference.
If plans get through Parliament, it would mean the next general election would be held on 7 May 2015 and the number of MPs would be reduced by 50 to 600.
The Boundary Commission would be asked to redraw the constituency map, so each has roughly the same number of voters, by the end of 2013 - allowing new constituencies to be used in the 2015 general election.
New constituencies would be set within 5% of a target quota of registered voters - apart from in Orkney and Shetland and the Western Isles which were "uniquely placed given their locations" - something welcomed by the Scottish National Party.
Mr Clegg told MPs: "Together, these proposals help correct the deep unfairness in the way we hold elections in this country.
"Under the current set-up, votes count more in some parts of the country than others, and millions feel that their votes don't count at all. Elections are won and lost in a small minority of seats.
"We have a fractured democracy, where some people's votes count and other people's votes don't count."
The proposal to "equalise" constituencies was in the Conservative manifesto - while the Lib Dems are committed to changing the voting system.
The coalition deal between the two parties saw an agreement for a referendum on changing the voting system to AV, but Tory MPs will be able to campaign against a change.
But Labour, which had also planned a referendum on switching to AV, attacked plans to link the referendum with proposed boundary changes and reducing the number of MPs, something Mr Clegg said would save £12m a year.
Shadow justice secretary Jack Straw said he backed a referendum on AV but added: "What we are not going to allow is for that support to be used as some kind of cover for outrageously partisan proposals in the same Bill to gerrymander the boundaries of this House of Commons by arbitrarily changing the rules for settling boundaries and by an equally arbitrary cut in the number of MPs."
He argued there was a "huge problem" of 3.5 million people who were eligible to vote but not on the electoral register - to which Mr Clegg hit back that Labour had done nothing about it for 13 years.
Other Labour MPs also stood up to complain that plans to change the constituency boundaries amounted to "gerrymandering".
But Mr Clegg accused them of "synthetic fury" on the issue, adding: "Members on all sides will see the proposal to cap the number of MPs at 600 is a sensible one."
Tory MPs were also annoyed at the prospect of a referendum on AV being held on the same day as elections in Scotland, Wales and Northern Ireland, which they argued would "skew" the result because turnout would differ across the UK. Plaid Cymru, the DUP and SNP have also complained about the date.
Campaign group Unlock Democracy welcomed the plans for a referendum on AV and for fixed-term parliaments. Spokeswoman Alexandra Runswick said: "These new proposals are stronger than those initially announced and far more likely to stand the test of time."
Mr Clegg also announced he was changing plans on giving MPs the power to dissolve Parliament before the fixed term is expired, following heavy criticism by Labour and some Tory MPs.
The power is linked to the coalition government's plans to introduce five-year fixed term parliaments, under which the prime minister would lose the power to dissolve parliament at a time of his or her choosing.
The government had said the threshold for dissolving Parliament would be 55% - high enough to stop either of the governing parties triggering an election without the other.
But both parties together have just over 56% of MPs and would still have been able to whip their MPs to trigger a dissolution.
Mr Clegg said they had "listened carefully" to MPs' concerns and had raised the threshold to two thirds, or 66% - the threshold used in the Scottish Parliament - which he said would make it impossible for any government to "force a dissolution for its own purposes".
And he stressed that the existing threshold for a no-confidence vote would remain as a simple majority of 50% plus one.
If a government lost a confidence vote, and no new government could be formed within 14 days, Parliament would automatically dissolve and a general election would be called, he said - insisting the changes would "strengthen parliament's power over the executive".
For Labour, Mr Straw said it was "the first major U-turn of this government and in less than two months".