The White Paper gives the assembly more powers to shape laws for Wales in areas like health and education, while streamlining Westminster's role.
But it sets out that a referendum would be needed before the assembly was given full law-making powers.
Welsh Secretary Peter Hain said the new system would need to have "bedded down" before any referendum could go ahead.
The document - called Better Governance for Wales - forms the basis of a new Government of Wales Bill to be introduced at the end of this year or early 2006.
The changes are due to take place following the next assembly elections in 2007.
At the core of the White Paper are three key areas, which the UK government said would ensure the assembly "continues to meet people's needs and remains accessible and accountable to them".
At elections, banning losing candidates from still being elected as regional "list" AMs.
Mr Hain told MPs it would mean bills for Wales would not have to "fight for space" in the Queen's Speech with Westminster bills and, instead, the assembly will bid to implement a new policy or modify an existing law.
From May 2007, a faster, more streamlined process is proposed for legislation for Wales at Westminster, involving a one-and-a-half-hour debate, rather than going through second readings, committees, report stages and third readings in both Commons and Lords.
Mr Hain said: "These enhanced, streamlined powers for the Assembly are adaptations of the current devolution settlement and, although they need the new Government of Wales Bill which we will introduce this winter, the (UK) Government believes that they do not require a referendum".
WHITE PAPER SUMMARY
'Streamlining legislation' by 2007 to allow Assembly-framed policy to be dealt with by Parliament in 90-minute debate and vote
Clear separation between Assembly executive and AMs to 'end confusion' and improve scrutiny
End 'abuse' which enables losing election candidates to still be elected as "list" AMs
Full law-making powers only after a referendum, but Peter Hain believes "no case" for one until after 2011
Mr Hain added that granting primary law-making powers to Wales "clearly would need a referendum" but he believed that there was "no case for contemplating a referendum until the experience of the new streamlined process had bedded down in the next Assembly term between 2007 and 2011".
He said that there was "no consensus" for a referendum and "if and when there is such a consensus, then we can consider triggering the referendum".
Mr Hain concluded his announcement by saying that the transition to devolved government in Wales had been smooth since 1997 because the pace of change had been determined by the people of Wales.
"These new proposals reflect that guiding principle by providing a practical, common-sense route map to better governance," he said.
Plaid Cymru said the proposals were a "major disappointment to anybody wishing to see Wales gaining a proper Parliament", falling short of law-making powers recommended by the Richard Commission and public opinion.
The commission, chaired by Lord Ivor Richard, presented its report in March last year.
It also recommended additional numbers of assembly members and said that it was "desirable, though not essential" for the assembly to have the power to vary tax.
The Welsh Conservatives called the White Paper "an unworkable sticking plaster" and the Welsh Liberal Democrats said the proposals were "cobbled together" and had "put Labour's needs before the needs of Wales".