The east Africa country currently has a president who is both head of state and government, a source of intense election tussles that has repeatedly plunged Kenya into bloody clashes.
The current prime minister is not the head of government and the position was created last year in a unity government put in place to end widespread post-election violence.
Under the draft, the president will be directly elected and will name a premier from the largest party or coalition of parties in parliament and who will be confirmed by parliament.
"Kenyans were unanimous that the era of an imperial president must come to an end and there must be an elaborate system of checks and balances running throughout the entire government structure," Nzamba Gitonga, the head of a panel of experts that drafted the law, said at the unveiling.
The draft law also proposes a decentralised government, introducing regional and county governments, sets limits on the size of the cabinet and introduces a senate.
Kenyans will debate the draft for the next 30 days and make suggestions to the experts. The final draft will be voted for in a referendum in 2010.
The last constitutional referendum in 2005 ended with the defeat of the government-backed "yes" camp, prompting President Mwai Kibaki to dissolve the cabinet and rename a fresh one without the ministers who opposed it.
Leaders of the two emerging camps -- Kibaki and then opposition chief Raila Odinga -- ran for the presidency in 2007 elections, whose disputed result sparked Kenya's worst post-independence violence which claimed some 1,500 lives.
Odinga accused his rival of stealing the vote.
A power-sharing deal brokered by former UN chief Kofi Annan made Odinga the premier and Kibaki retained his post.
Also in the agreement was an undertaking to make institutional and legal reforms, wich included a new constitution to avoid fresh unrest.
"I think the time has come for Kenyans to bite the bullet. Let there be a civilised debate," Odinga said during Tuesday's ceremony.