New mothers will be able to return to work two weeks after childbirth and share the rest of their maternity leave with their partner under new plans.
From 2015, a fully flexible system of parental leave in England, Scotland and Wales will give women a clearer "route back" to work, ministers have said.
Parents will be able to take time off together or in turns and have a legal right to request flexible working.
Unions welcomed the plans but small businesses warned of their cost.
The coalition government has been looking at ways of extending flexible working and making existing parental leave arrangements work better for both partners and conducted a consultation last year.
At the moment, new mothers can take a maximum of 52 weeks of leave after the birth of their child, while fathers are entitled to two weeks of statutory paternity leave of their own.
Since April 2011, fathers and mothers have been able to share some of the 52 weeks' existing leave, with the father able to take up to six months beginning after the baby is 20 weeks old.
However, this can only be taken as a single block - as can the leave the mother takes.
Ministers are now promising a new system, to come into effect in 2015, based on "maximum flexibility". In a speech on Tuesday, the deputy prime minister Nick Clegg announced.
- A new mother will be able to trigger flexible leave at any point after the first two weeks' recovery period
- Parents will be able to share the remaining 50 weeks between them as they like
- Leave could be taken in turns, in different blocks, or at the same time
- Maximum leave will remain 12 months, nine of them on guaranteed pay
- Couples will need to be "open" with employers and give them "proper notice"
- Paternity leave to remain at two weeks but to be reviewed in 2018
Mr Clegg said ministers considered the option of increasing the amount of statutory paternity leave but that had been put on hold amid concerns in business and government about its cost.
However, expectant fathers will be able to claim unpaid leave to attend two antenatal appointments.
"I have accepted that extending paternity leave should be revisited when the economy is in a stronger state," he said.
"These are major reforms and - at a time of continuing economic difficulty - it is sensible to do them in a number of steps rather than one giant leap. More and more men are taking on childcare duties - or want to - and flexible leave builds on that."
Mr Clegg also said that the government will extend the legal right to request flexible working to all employers.
Millions of parents already enjoy the right to request flexible working - such as changing shifts, varying start and finish times, working from home or shifting to part-time hours.
At the moment, parents with children up to the age of 16, or parents with disabled children up to 18, can request flexible working patterns as long as they have at least 26 weeks of service.
Employers must seriously consider such a request, although they are within their rights to turn it down for sound business reasons.
But the deputy prime minister said there was still a stigma attached to requesting flexible hours and the government intended to legislate to give everyone the right to do so, when parliamentary time allows.
The combined measures, he claimed, will give parents "more options" and professional women a "real choice" about how they balance their careers and family responsibilities while respecting couples who want more "traditional arrangements".
"So many couples feel like they are facing an impossible mathematical equation," he said of current arrangements.
"And it is an equation where the answer is almost always rigged. Because whichever way you look at it, the solution ends up with the mother doing more of the caring and the father doing more of the earning."
Downing Street said the implications for business had been fully considered and administration of the new rules would be "as light-touch as possible".
The Confederation of British Industry employers' group said flexible parental leave was a good way of supporting working families.
"We must ensure that the new system is simple to administer, and does not give rise to legal action from fathers seeking parental rights that mirror those available to mothers," said its chief policy director Katja Hall.
But the Federation of Small Businesses said extending the right to request flexible working would place added burdens on firms.
"Allowing chunks of maternity and paternity leave of as little as one week to be taken will place a disproportionate strain on small firms and will be very complicated to administer," said its national chairman John Walker.
Unions, however, said the changes would make "life easier" for millions of working parents.
"Allowing all staff to ask to work flexibly is common sense to good employers," said TUC general secretary Brendan Barber.
"But we know that too many businesses are still reluctant to modernise working practices so the government is right to give them a nudge with this new universal right to request flexible working."
Labour said flexible parental leave was "helpful" and built on changes introduced by the party when they were in government but warned that women should not be rushed into returning to the workplace before they were ready.
Shadow women's minister Yvette Cooper said cuts to child benefit, child tax credits and childcare were making life difficult for many parents. "Nick Clegg and David Cameron need to wake up to the real financial pressures most working families face, and stop making it harder, rather than easier, for families to manage," she said