Analysts say the reforms are meant to address longstanding public grievances in the North African nation, and possibly to prepare for a smooth transition amid concerns for the health of 78-year-old leader Abdelaziz Bouteflika.
The president and his inner circle have held a firm grip on power since 1999 and, as the end of his rule appears to close in, there are fears of instability in the mainly Muslim country of 40 million, a key energy producer.
The main political reforms will see the reintroduction of two-term limits on the presidency - lifted in 2008 to allow Bouteflika to run for a third time - and a provision requiring the president to nominate a prime minister from the largest party in parliament.
An independent electoral commission will also be established, the roles of women and youth will be recognised and freedoms of assembly and the press will be explicitly guaranteed.
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The reforms "strengthen freedoms and enshrine the separation of powers and the principles and values of the Algerian people," Ahmed Ouyahia, Bouteflika's chief of staff, said last week.
Critics disagree, saying the reforms are little more than a show and will do little to reduce the influence of the powerful elite, including Bouteflika's National Liberation Front (FLN) party and army generals, who dominate the country.
"This constitutional reform project does not have the concerns of Algeria at its heart but only the current political regime which it is designed to protect," said Ali Beflis, a former prime minister who ran against Bouteflika in 2004 and 2014.
John Entelis, an Algeria expert at Fordham University in the United States, said the reform package was clearly designed to address public concerns.