Pledging to provide "work for those who can, security for those who can't", Mr Darling announced radical plans to transform Incapacity Benefit and force all claimants to attend Jobcentre interviews.
Most of the measures will feature in a Welfare Reform Bill in next month's Queen's Speech and legislation will come into force in 2000 and 2001.
Three consultation documents, printed overnight in an attempt to prevent leaks, outlined the details of the proposals to be sent out to interested groups for comment.
A key part of the reforms will be a "single gateway" for all benefit claimants of working age, including lone parents, the disabled and those receiving Jobseekers' Allowance.
The controversial proposal, to be piloted in 12 areas from next year, will make attendance at an interview with a personal jobs adviser a condition of benefit. Only the terminally ill will be exempt.
One of the most significant changes proposed is to pay Incapacity Benefit only to people who have been in recent work and have paid enough National Insurance contributions. Mr Darling said that the move was essential to end a system used by the previous government to mask the unemployment figures. When a quarter of all men over 60 currently claimed the benefit, it was clear the system needed to change, he said.
Incapacity Benefit will also be means-tested for the first time and will be docked for any new claimant who has a private pension of more than pounds 50 a week.
"We will restore IB to its original purpose as an insurance benefit for people who have worked. Too often it has been abused as a more generous form of support by the long-term unemployed," Mr Darling said.
To sweeten the pill of the most severe changes, the minister announced that he was scrapping the much-criticised Benefits Integrity Project, which came under attack from disabled rights groups last year, when it was revealed that it had cut aid to thousands of people with genuine illnesses.
Mr Darling also used his Commons statement to announce the latest upgrade of all benefits, with the biggest increase to date in child benefit - to pounds 14.40 a week.
New benefits for severely disabled children were unveiled, together with extra cash for the poorest disabled claimants.
None of the measures will affect current claimants, and as a result will generate savings only in the long term. The Department of Social Security estimates that pounds 750m a year will be cut from the pounds 24bn disabled benefits budget in 20 years' time.
Mr Darling told the Commons that the changes would modernise the welfare state from a post-war set of principles to an active system designed to meet the challenges of the 21st century.
"We are talking about reforms not for the next two or three years, but for the next two or three decades," he said.
"It is good news for those out of work who will be given better advice and opportunities to work. But bad news for those who abuse the system, and bad news for those who try to claim benefits they are not entitled to be on.
"This government shows a determination to modernise the welfare state and reshape it for today's world."
Iain Duncan Smith, the Conservatives' Social Security spokesman, said that many of the announcements were "relaunched, reissued and re-hashed".
"It is a statement of the general, with more consultation documents, not a great deal of decision-making, and leaving the serious decisions yet to be made. It is a missed opportunity yet again," he said.
"Will the Government now admit it is quite clear they are beginning to attack the contributory principle, and that what they intend to do is ultimately to abolish it?"
Frank Field, the former welfare reform minister who resigned from the Cabinet in July accusing the Chancellor, Gordon Brown, of blocking reform, welcomed the announcements.
However, he warned the minister that he could expect opposition from many of the organisations it was due to consult on the plans.
The Prime Minister's official spokesman denied that thestatement had been brought forward a day to deflect attention from Ron Davies's resignation as Secretary of State for Wales.
Further announcements about reform of pensions and widows' benefits will be made in the next few weeks.
t Child benefit to be increased by pounds 2.95 to pounds 14.40 a week
t All benefits claimants of working age, including lone parents and the disabled, must attend interviews at job centres
t Incapacity Benefit to be paid only to those who have recently worked and paid sufficient National Insurance contributions
t New test to ensure all claimants give evidence of work prospects
t New Minimum Income Guarantee to give poorest pensioners at least pounds 75 a week. Pensioner couples to receive minimum of pounds 116.60 a week
t pounds 30m fund to help disabled into work, including for 1,500 new jobs for severely disabledReuse content