Nick Clegg says he will never join a Labour or Tory cabinet, but will push instead for a "new type of government".
Lib Dem leaders have traditionally made proportional representation the price of a deal with other parties in the event of a hung parliament.
But in his first speech as leader, Mr Clegg went further by demanding a shake-up of the whole political system.
He also flagged up the possibility of the Lib Dems offering tax cuts at the next general election.
"If we want a better Britain, with opportunity for everyone, we've got to have fair taxes.
"Cutting income tax by 4p in the pound is a great start.
"But we must never stop thinking about how we make taxes fairer."
The party is considering a tax on the homes of the super rich to pay for cuts lower down the income scale.
Mr Clegg received a three-minute standing ovation for his speech at the party's spring conference in Liverpool.
He spoke for more than 50 minutes without notes, overcoming a few initial signs of nervousness to deliver an impassioned plea for political change.
He told delegates electoral reform "wasn't enough" and he wanted to "redesign" Britain's political system for the 21st Century.
The speech was being sold as an attempt to move on from a damaging row over the EU treaty which saw the resignation last week of three frontbenchers.
Mr Clegg joked that if the party had wanted to rebel in the past they would have had to "borrow MPs from the other parties".
But he made no further mention of the EU treaty debate, focusing instead on portraying the Lib Dems as an "anti-establishment" force that can smash Britain's two-party system.
He called for a new crackdown on sleaze - with by-elections for MPs who break the rules.
And he vowed to fight for an "end to big money politics" - proposing a £25,000 limit on political donations.
He also addressed the question of alliances with other parties head-on, saying he would never join a Conservative or a Labour government.
"I will never allow the Liberal Democrats to be a mere annexe to another party.
"But am I interested in building a new type of government? Yes.
"Based on pluralism instead of one party rule? Yes.
"A new system, that empowers people not parties? Yes.
"We want a new, more liberal Britain."
Aides refused to be drawn on the precise details of the new "pluralistic" government Mr Clegg wanted.
But they said the party was no longer interested in having a "few cabinet ministers sitting in a Tory or Labour government" - but wanted a constitutional convention to examine all aspects of how Britain is governed.
Mr Clegg also focused on education and health in his speech - issues he believes matter more to ordinary voters than Europe.
He also pledged to build a "people's NHS" with treatment within a specified waiting time or guaranteed private care.
In his speech, Mr Clegg mounted a sustained attack on his political opponents.
Tax cut claim
HAVE YOUR SAY
He should never say that he is not prepared to form a coalition with either the Labour or the Conservatives. Change often is created from within and not necessary whilst in opposition
"Alistair Darling stole a policy from the Tories and announced an inheritance tax cut that will help only the richest 6% of people.
"And do you know where they found the money?
"If the reports are true, they scrapped a plan they'd been developing all summer.
"A plan to cut child poverty.
"The future of hundreds of thousands of children sold down the river because the Labour party sold its soul and became the second Conservative party.
"Money taken from the poorest kids and given to the richest adults, no questions asked.
"Gutless, heartless, incompetent."
He also attacked the Conservatives, saying Tory leader David Cameron for peddling "sham politics from a party bereft of belief, that will say anything to get elected".
And he accused shadow chancellor George Osborne of "having more positions than the Kama Sutra" on Northern Rock.