Yemen is to become a federation of six regions as part of its political transition, state media report.
Final approval was given by a committee chaired by President Abdrabbuh Mansour Hadi following two weeks of talks with delegates from across the country.
The federal structure should be enshrined in a new constitution that must be put to a referendum.
The move is intended to end the complaints against centralisation that fed rebellions in the north and south.
Yemen has also been struggling to deal with the unrest sparked by a 2011 popular uprising that forced long-time President Ali Abdullah Saleh to step down, and an insurgency by Islamist militants allied to al-Qaeda.
Sanaa 'not affiliated'
President Hadi formed the committee to decide Yemen's new structure in late January following the completion of the National Dialogue Conference, created under the Gulf Co-operation Council-brokered agreement that led to Mr Saleh's departure.
Delegates at the NDC agreed to create a decentralised, federal system, and to reverse the political and economic marginalisation that southern Yemenis had suffered since unification in 1994.
On Monday, state news agency Saba reported that the presidential committee had voted overwhelmingly in favour of dividing the country into six federal regions - two in the south - Aden and Hadramawt - and four in the north - Saba, Janad, Azal and Tahama.
The capital, Sanaa, would be a "federal city not subject to any regional authority" and the constitution would "guarantee its neutrality", it said.
The port city of Aden would also have a special status and be given "independent legislative and executive powers", Saba added.
Many politicians from the south had called for a federation of two regions.
They argued that it would put them on a more equal footing with the north while securing their access to a larger share of the country's oil resources, which are located in the south.
Southern leaders swiftly rejected Monday's announcement.
"What has been announced about the six regions is a coup against what had been agreed at the dialogue," Mohammed Ali Ahmed, a former South Yemen interior minister who returned from exile in March 2012 and withdrew from the NDC in November, told the Reuters news agency.
Nasser al-Nawba, a founder of the separatist Hiraak al-Janoubi (Southern Movement), meanwhile vowed that it would continue what he described as its peaceful struggle until independence was achieved.