The seven university presidents have committed themselves to a radical transformation of courses at undergraduate and postgraduate level, in return for increased investment from Government.
In an unusual move, the colleges also promise to compete for the new funding. Each college, they say, would table reform proposals that would be evaluated by external experts.
The proposals, made in a submission to the Cabinet, come amid what one university president, Dr Hugh Brady of UCD, calls the "intense frustration" among college heads about continuing underfunding.
The universities say this underfunding has been allowed to reach "crisis" levels, despite the Government's supposed commitment to a "world-class" university system.
There is also anger among university presidents at the Government's failure to respond to the the landmark OECD report on the third-level sector, which called for a "quantum leap" in funding.
DCU president Prof Ferdinand von Prondzynski said the report has been effectively shelved.
In their submission to Government, the seven university heads promise "a comprehensive proposal of innovation and reform" .
The plan would see an unprecedented level of collaboration between them.
Where necessary, students would be able to move between colleges.
The universities say they are also ready to co-operate on joint reforms.
Universities say they need more funding in order to attract high-quality international academics and students, to upgrade facilities and to reform teaching and learning programmes.
They also plan to upgrade management systems.
The universities say these changes will cost €104 million a year. They are also seeking an additional €408 million for building and other infrastructural projects in the seven years to 2013.
The universities say the new funding will be complemented by money raised from their own resources. The Irish Universities Association, representing the college heads, stresses that its proposals are being made in a constructive manner to Government.
In his recent ardfheis speech, Taoiseach Bertie Ahern spoke of the need to create a new generation of highly skilled graduates.
But the universities say it is not possible to build this on what they call "a creaking, under-funded university sector".
The universities say their financial crisis is deepening.
There had been hopes that the Government's new Strategic Innovation Fund, established to reward colleges for modernisation, would deliver substantial funds.
But the latest indications suggest that the new fund will benefit from a relatively small budget in the forthcoming Estimates.
The universities say the Government's proposals for a national research plan will not be fully realisable unless universities and the type of graduates they produce are radically transformed in order to provide a sustainable, modern base for building world-class research capacity.
The universities trace the financial crisis back to several factors, including:
PLAN: main points
Students able to move between third-level colleges, as required
Small-group interactive learning becomes the norm rather than the exception
Flexible degree programmes, allowing subjects and disciplines to be combined; this will help prepare students to work in new and emerging areas of knowledge and innovation
Creative teaching and assessment strategies to encourage group learning and teamwork
All students to enjoy access to courses which will prepare them for a working life in a ... vibrant knowledge economy, including skills in business, management, economics, technology, ethics and civic/social responsibility
Source: Securing Competitive Advantage in the 21st Century, Irish Universities Association