Under the proposal, the global media conglomerate will be divided into two publicly traded companies. One entity will operate as a newspaper and book publishing firm. The other will be an entertainment company that includes the 20th Century Fox movie studio, the Fox broadcast TV network and the Fox News channel.
The Murdoch family, which controls nearly 40% of the voting shares in News Corp., is expected to maintain control of both companies.
"There is much work to be done, but our board and I believe that this new corporate structure we are pursuing would accelerate News Corporation's businesses to grow to new heights, and enable each company and its divisions to recognize their full potential -- and unlock even greater long-term shareholder value," Murdoch said in a statement.
The splitting of News Corp. is a symbolic turning point for its 81-year-old CEO. Murdoch's global conglomerate was built on the foundation of a single Australian newspaper he inherited from his father. Through the years, he maintained a fondness for newspapers even as he purchased entertainment companies and assembled a company with a market value of $52 billion. In hearings last summer before U.K. lawmakers, he conceded that he regularly called newspaper editors under his employ with the greeting: "What's doing?"
Investors have already given their blessing to the split, having pushed shares of the company's Class B stock up 10% since the news of the plan broke early Tuesday.
Under the current proposal, News Corp. shareholders will receive one share of common stock in the new company for each share of News Corp. that they currently hold. Each company would maintain two classes of stock.
Murdoch will serve as chairman of both companies and CEO of the media and entertainment company. The company said it plans to put together management teams and boards for both businesses over the next several months.
The split remains subject to final board and regulatory approvals. News Corp. said it also plans to hold a meeting of its shareholders sometime in 2013 and expects it to be completed in about a year.
Analysts relished the prospect that the faster growing pay TV segment would be valued more highly by new investors who weren't willing to buy shares in a company being dragged down by a newspaper industry in decline.
Still, many analysts had questions about which entity would bear the financial risks of the ongoing U.K. probe into phone hacking and bribery. Besides legal costs, News Corp. also faces potential fines in the U.S. under the Foreign Corrupt Practices Act, which punishes companies that have bribed officials abroad.
Breaking off the newspaper and book publishing assets into a separate company makes them more "bite size" and ripe for being taken private by a third party, according to Needham & Co. analyst Laura Martin.
The publishing side is expected to be much smaller, with some analysts valuing it at about $5 billion, compared with the current market value for News Corp. as a whole of about $54 billion.
It is unclear if the split will appease the British telecommunications regulator, Ofcom, which is reviewing whether British Sky Broadcasting -- of which News Corp. holds a 39% stake -- is "fit and proper" to hold a broadcasting license. Ofcom is expected to wrap up its review later this summer.
British authorities have been probing allegations that News Corp. journalists at its now-shuttered News of the World and other papers hacked into phones and bribed public officials to gain exclusive information.
News Corp. shares rose 19 cents to $22.60 in premarket trading.
Business Writer Ryan Nakashima in Los Angeles contributed to this report.