The European Commission has suggested member states should open their postal markets to full competition by 2009.
Unions are expected to oppose the planned reforms
National mail giants have competed for some services since 1997, but the new move will break monopolies on delivery of letters of less than 50g (1.8oz).
The idea is expected to meet strong opposition in France, Italy and Spain.
However, it is supported by the three EU countries that have already introduced full competition - Finland, Sweden and the UK - and by Germany.
"Based on extensive research, the commission believes it is the best way to maintain the universal service while also continuing to improve quality and choice for consumers and businesses," the EU executive said in a statement.
Internal Market Commissioner Charlie McCreevy said he hoped reluctant countries would be persuaded by the success of liberalisation in those nations that had already undertaken it.
"The smart operator, the smart country, sees it as an opportunity," he said, as he announced the proposals on Wednesday.
Supporters see the move as a key step in the development of the EU's single market in goods and services.
The EU postal sector is estimated to be worth 90bn euros (£60bn) per year - and roughly half of all letters delivered weigh less than 50g.
Pro-competition campaigners have criticised the commission's proposals for leaving too many details to be decided by member states.
They also say the commission has done too little to ensure that national regulators are fully independent, and strong enough to enforce the new rules.
The commission proposal will allow governments to subsidise the delivery of letters to sparsely populated regions, but the French state-owned post office, La Poste, says such measures do not go far enough.
It is leading efforts to ensure that national operators about to lose their monopoly get more compensation - and that the cash will come from new companies entering the market.
Unions are also expected to oppose the reforms, in a sector which employs five million people across Europe, mostly in the public sector.
The commission fears that its proposals could become a political cause celebre in France as the 2007 elections approach, as the Services Directive did in 2005.