The Liberal Democrat manifesto will commit the party to ending imprisonment for possession of drugs for personal use and ensure that those arrested with small amounts of illicit substances do not get a criminal record.
Declaring that the "war on drugs" had failed, Lib Dem leader Nick Clegg said the party would also establish a review to assess the effectiveness of cannabis legislation experiments in US states like Colorado and would allow doctors to sell the drug in the UK for medicinal use.
In a highly symbolic marker of what the Lib Dems described as "the most far-reaching drug reform policies ever put forward by a major political party ahead of an election", Mr Clegg promised to shift responsibility for drug policy from the Home Office to the Department of Health, effectively treating it primarily as a health problem, rather than a law enforcement issue.
But he said Lib Dems would continue to apply severe penalties to those who manufactured, imported or dealt in illegal drugs, and clamp down on those who produced and sold unregulated chemical highs.
The job of tackling supply would remain with the Home Office, as a police issue.
Announcing his plans at Chatham House alongside entrepreneur Sir Richard Branson - a member of the Global Commission on Drug Policy - Mr Clegg was due to say: "We believe the time for action on drugs reform is now.
"The UK and its partners must acknowledge that the 'war on drugs' hasn't worked.
"Despite the decades of tough talking and billions of dollars spent in waging this war, the global drug problem and the criminal markets that underpin it remain all but untouched by our enforcement efforts.
"I'm incredibly frustrated that, after five years in coalition, we cannot take our work to its logical conclusion - just because the Tories are scared of being branded soft on drugs.
"It's time for the Conservatives and Labour to realise that the world has moved on, reform is no longer a taboo subject and voters expect politicians to deliver results based on solid evidence, not overblown rhetoric."
Mr Clegg will say he is "anti-drugs" but argue that this implies a responsibility to reduce the harm caused by drug use.
"At the moment, the level of harm to individuals and communities - here and around the world - is still unacceptably high," he will say.
"We need to get a grip on this problem.
"So, if you're anti-drugs, you should be pro-reform.
"What we now need is brave political leadership to openly acknowledge that new ways of controlling illegal drug markets and discouraging use are required."
Mr Clegg will say that around one-third of British adults have taken illegal drugs in their lifetime - including one in five 16 to 24-year-olds taking drugs in the last year alone.
"For many, it's something you try when you're young then grow out of," he will say.
"But, in this country, if you're a young person - say out at a club with friends - and you get arrested for possession of a small amount of drugs, it's likely you'll end up with a criminal record.
"That means this stupid youthful mistake could damage your whole future - possibly stopping you from getting the job you want, whether it's as a doctor, nurse, teacher or even taxi-driver.
"What would you do?
"If this was your child and you found those drugs would you go to a doctor or police officer to help them?
"I think nearly all of us would call the health expert.
"And, in the same way, I just don't think it's right for us as a society to write off these young people who haven't hurt anyone else, just made the wrong choice, so early.
"We need to put an end to this ludicrous situation.
"Our focus should be on getting them the help they need, not punishment, so they can go on to realise their ambitions and make a positive contribution to society.
"I want a see a system where anyone who is arrested for possession of drugs for their own personal use gets either treatment (if they need it), education, or a civil fine."