A local-government Bill to be included in next month's Queen's Speech will have as its centrepiece a commitment to introduce powerful US-style mayors across the country.
The move follows a series of scandals in Doncaster, Glasgow, Paisley, Hull and Hackney that tarnished Mr Blair's attempts to portray his party nationally as "sleaze-free".
London has already been promised its own mayor for 2000, but Mr Blair wants the idea to spread quickly to restore public faith in local town halls.
Glasgow, Manchester and Cardiff are believed to be among the most likely cities to first adopt the reforms. In Glasgow in particular, the mayoralty is seen as a strong counterweight to the new Edinburgh-based Scottish Parliament. Even cities such as Birmingham, which have traditionally opposed mayors, may adopt the idea following pressure from Downing Street.
As well as helping to resurrect civic pride, senior party figures see the move as a long-overdue means of by-passing the Old Labour cliques that continue to run the party's heartlands with little opposition.
"Even if, in some cases, an Old Labour candidate stands for mayor, we would be prepared to see a strong independent candidate such as a businessman, win the day," a party source said. However, it is more likely that, as in London, the party's ruling National Executive Committee would have a major role in the selection of local mayoral candidates.
The proposals mark a significant victory for Mr Blair's camp following strong resistance from the Deputy Prime Minister, John Prescott, and some council leaders.
Mr Prescott's White Paper on local government, published earlier this year, included a weak reference to direct elections as an option, but, following months of argument, it is understood that directly elected mayors will be a key part of the Bill.
Mr Blair personally ensured that the London mayoralty commitment was in Labour's manifesto at the last general election, and the issue is seen by his supporters as vital to the modernisation of the party.
The mayoral plan backs up parallel proposals, revealed in The Independent last week, to introduce laws to require councillors to declare all hospitality and gifts on public registers.
Tony Travers, director of the London School of Economics' Greater London Group and a leading academic in the mayoral field, welcomed the proposals. But he added: "When MPs vote for these proposals, it really will be the closest thing we have to turkeys voting for Christmas. The mayors will have more direct votes, often in millions, than MPs. Who is going to listen to an MP when the Mayor of London grabs all the headlines?"