The government set up the commission in January to look at building effective relations between local government and the Scottish parliament, and how to make councils more responsive to communities.
The commission's report, published on Tuesday, says wide-ranging changes such as separation of the executive role from the scrutiny and representational functions of councillors, initiatives to encourage more people to become councillors and the introduction of a more proportional electoral system are central to local government renewal.
The proposals, out for consultation, will form the basis of recommendations to the Scottish parliament next June.
He made clear the public mood would not allow councils to stand still. Local government would have to undergo very substantial change in order to 'earn its place beside the new parliament and executive'.
A review of councillor numbers in Scotland would go hand in hand with one of internal management structures and members' roles and responsibilities, he said.
The commission suggests the relationship between councils, the parliament and the new Scottish executive should be defined in a covenant which gives councils right of access. It also proposes setting up a joint forum, consisting of MSPs and local government representatives, to oversee relations between the tiers of government - a recommendation which echoes the 'partnership council' provided for in Welsh devolution legislation.
Convention of Scottish Local Authorities president Keith Geddes welcomed the main thrust of the report. But he warned of fundamental conflicts of interest in proposals which would allow staff to become members of the council which employs them, saying: 'There is a fundamental conflict of interest which cannot easily be overcome.'
The commission presented its views as unanimous. But the issue of political restrictions on staff is contentious among the commissioners and could still cause disputes between them.
Unison Scotland - whose general secretary Matt Smith is a commissioner - has just launched a campaign to have the restrictions lifted.
The report invited comments on councils' 'unhealthy' dependence on central funding.
Local government minister Henry McLeish heralded the report as the first step in a 'renaissance' of Scottish local government.