The Lib Dems have argued for change for years, saying the current system produces highly unrepresentative results and is biased against smaller parties.
However, it has reservations about the AV system, believing it is not truly proportional.
In asking the public to decide on whether to change the system, Mr Brown said there was a "stronger case than ever" against governments being elected with a minority of the popular vote.
Labour won power in 2005 with a 36% share of the popular vote, the lowest in history and down from the 43% it gained in 1997.
"If we want a politics that is more open, more plural, more local, more democratic, then we will need to make big changes because the only way to ensure politics serves the people's values is to make all those who wield political power genuinely accountable to the people," the prime minister said.
Some pro-reform campaigners believe the referendum should happen on the same day as the general election to boost turnout.
Power 2010, which campaigns for democratic reform, said change to the voting system was "central" to rebuilding trust in political institutions but it questioned the timing of the proposed referendum.
WHAT IS ALTERNATIVE VOTE
Voters rank candidates in order of preference and anyone getting more than 50% in the first round is elected. If that doesn't happen, the candidate with the fewest votes is eliminated and their second choices allocated to the remaining candidates. This process continues until there is a winner
"These are post-election promises," said Pam Giddy, the organisation's director. "We are in the midst of a political and financial crisis - will these reforms deliver an accountable Britain?"
The AV system, currently used in Australia and in some elections in Ireland, is designed to ensure majority backing for those elected but is not the favoured choice of many campaigners.
The campaign group Unlock Democracy said the public ought to decide which electoral system should be included in a referendum.
"The AV system, whilst offering the voter greater choice, is not proportional and a mere baby step in the face of the widening chasm between voter and politician," said its director Peter Facey.
"Parliament will remain as unrepresentative and subsequently unresponsive as ever. "
After he was elected in 1997, Tony Blair commissioned a review on options for electoral reform headed by the late Lib Dem peer Lord Jenkins.
This backed a different version of the alternative vote system known as AV Plus. Labour did not act on the recommendations.
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