The number of categories will be reduced from 109 to 78 with many existing categories merged, while some will be dropped completely.
Each category must now start out with at least 40 contenders instead of 25.
Grammy president Neil Portnow said: “It ups the game in terms of what it takes to receive a Grammy.”
The top awards, which include best album, song of the year and best new artist, will remain the same.
Separate male and female vocal categories in fields such as pop, R&B and country are among those being merged, with men and women competing together.
“A great singer is a great singer is a great singer, and somebody that has a gift in terms of their voice, and is at the top of their game in terms of their delivery and emotion, really isn't necessarily defined by gender,” Mr Portnow said.
Shortlists that are being ditched include best Native American album and best spoken word children's record.
The new rules also state that shortlists which make between 25 and 39 nominations will only have three finalists on the big night.
If a category attracts fewer than 25 entries, it will be removed for that year and ultimately removed if this happens for three successive years.
“We are talking about the most prestigious, coveted award and it should be a high bar in terms of the measurement of receiving that,” Mr Portnow said.
The Grammy Awards usually take place in February. A date for the 54th annual ceremony has yet to be announced.No tags for this post.