The Council, seen as a rubber stamp for the Kremlin, has largely consisted of former officials or Moscow businessmen with few links to the regions they represented.
Putin said in an address to the Council that the reforms should make it "more democratic," maintaining that they "fully correspond to the logic of the development of our political system on the whole."
Parliament has passed a series of reforms that have been widely seen as an effort by the Kremlin to assuage the public anger that has spilled into the streets in a series of anti-Putin rallies that drew tens of thousands in Moscow.
Members of the upper house are currently elected by local legislatures. Putin's bill, which is expected to get parliamentary approval, would allow elected regional governors to appoint a member of their team to the Council with the idea that they would be accountable for the members they appoint.
Putin said prospective members of the Council should come from local legislatures and be residents of the regions they represent for at least five years.