The Government is "emphatically not saying the BBC should not be popular" but is introducing a new requirement that the corporation provide "distinctive content" rather than just chase ratings, Culture Secretary John Whittingdale has told MPs.
Unveiling the Government's White Paper on the future of the corporation, Mr Whittingdale confirmed that the BBC was to have a new unitary board with a majority of members independent of the government.
He also confirmed that media watchdog Ofcom would regulate the broadcaster and would be "a strong regulator to match a strong BBC".
The change will be the first time in its 90-year history that the BBC will be regulated by an external organisation.
The licence fee remains "the most appropriate funding model" for the BBC, and will increase in line with inflation until 2021/22, when there will be a new settlement, Mr Whittingdale said.
People watching BBC programmes on demand online will be required to obtain a TV licence, he said.
Mr Whittingdale told MPs: "Our reforms give the BBC much greater independence from Government in editorial matters, in its governance, in setting budgets and through a longer charter period.
"They secure the funding of the BBC and will help it develop new funding models for the future.
"At the same time, these reforms will assist the BBC to fulfil its own stated desire to become more distinctive and to better reflect the diverse nature of its audience.
Mr Whittingdale said the current system of regulating the BBC was "confusing and ineffective", adding that "reform is vital".
Responding to the White Paper, director-general Tony Hall said it "delivers a mandate for the strong, creative BBC the public believe in".
He said: "At the end, we have an 11-year Charter, a licence fee guaranteed for 11 years, and an endorsement of the scale and scope of what the BBC does today.
"The White Paper reaffirms our mission to inform, educate and entertain all audiences on television, on radio and online."
But he said there were some areas where the BBC would continue to talk to the Government to address remaining issues, including allowing the National Audit Office to be the BBC's auditor and how the new board was appointed.
He said the BBC wanted the chairman and deputy chairman to be appointed by the government through an independent public appointments process.
"After that, we want a board that is the right size, with the right balance of skills and the right talents, appointed in the right way," he said.
Rona Fairhead, chairman of the BBC Trust, said: "We recognise that the Government has moved, but we need to debate these issues to ensure the arrangements for the board achieve the correct balance of independence, public oversight and operational effectiveness.
"We believe there is more than enough time to get this right, and we will continue to discuss this with the Government."