Selig made the announcement after two days of meetings with representatives of the 30 teams. The proposal is to be voted on by the owners in November.
"I'm proud of them," Selig said of the replay committee. "It's worked out remarkably well. It's historic. There's no question about it."
A 75 percent vote by the owners is needed for approval and the players' association and umpires would have to agree to any changes to the current system.
MLB vice president Joe Torre gave the replay presentation to representatives from all 30 teams on Wednesday and it was discussed Thursday morning.
Atlanta Braves President John Schuerholz, a member of the replay committee along with Torre and former manager Tony La Russa, said the umpires were receptive to the change. Schuerholz said 89 percent of incorrect calls made in the past will be reviewable, but he did not provide a list.
Umpires have come under increased scrutiny following several missed calls this season.
"We believe this will be very impactful and very, very meaningful and useful for all sides," Schuerholz said. "Managers will have a new tool that they'll have to learn how to use."
Managers will be allowed one challenge over the first six innings of a game and two from the seventh inning until the completion of the game. Calls that are challenged will be reviewed by a crew in MLB headquarters in New York City, which will make a final ruling.
A manager who sees a call he feels is incorrect can file a challenge with the crew chief or home plate umpire. Only reviewable plays can be challenged. Non-reviewable plays can still be argued by managers, who can request that the umpires discuss it to see if another member of the crew saw the play differently. Reviewable plays cannot be argued by the manager.
Challenges not used in the first six innings will not carry over, and a manager who wins a challenge will retain it.
The home run replay rules currently in use will be grandfathered in to the new system, Schuerholz said.
MLB expects to use the new system in the 2014 playoffs, and the system could be enhanced in the postseason. Training sessions for umpires will start in the Arizona Fall League this winter and continue into spring training.
"We know we have to prepare people for this," Schuerholz said. "Everyone is embracing it. We believe managers will in time."
Schuerholz said after the first year MLB will look at what worked and what didn't and make adjustments for 2015. "It's going to take some time," he said.
One of Selig's major concerns was the possible slowing of games. Schuerholz said with a direct line of communication between the central office and the ballparks the expectation is that replays under the new system will take 1 minute, 15 seconds. Current replays average just over 3 minutes.
"We want to prevent stalling," Schuerholz said. "If it's a reviewable play, he (the manager) has to tell the umpires he's going to review it."
In other matters, Selig said baseball's investigation of Biogenesis, the now-closed Florida anti-aging clinic accused of distributing banned performance-enhancing drugs, has been completed.
Alex Rodriguez was suspended through 2014 and All-Stars Nelson Cruz, Jhonny Peralta and Everth Cabrera were banned 50 games apiece on Aug. 5 when Major League Baseball disciplined 13 players for their relationship to Biogenesis. Rodriguez has appealed his suspension.
Selig also called the Tampa Bay Rays stadium situation "very, very discouraging."
"Baseball needs a resolution to this problem," Selig said with Stuart Sternberg, principal owner of the Rays, in the room listening. "I find it a very, very troubling situation. We were optimistic this was moving in a very positive direction. Unfortunately, it's stalled."
Selig said the situation was serious enough that he was giving "very strong consideration to assigning someone from MLB to intervene in this process, find out exactly what the hell is going on."
"They've been a model organization, extraordinarily capable," Selig said. "They've done everything in their power to make their ballpark situation work. Years have ticked by now with no tangible progress."
The team is obligated to play at outdated Tropicana Field through 2027 and is averaging just over 13,000 fans a game this season. The low attendance figures have led to the Rays receiving millions of dollars in revenue sharing.
"Without that, we wouldn't be able to compete," Sternberg said. "The other owners are looking at it. How many years is this going to be? How much money is it going to be? We should be able to get to the point where the revenue sharing dollars we would receive don't need to be so significant year in and year out."
Relocating is not on the table, Sternberg said.
"Frankly, I haven't been able to get this (new stadium deal) done," Sternberg said. "Something needs to be done and nothing's happening. We've got an enormous following, but something is clearly stopping people from coming through our doors. This isn't a one- or two-year thing. Even the economy has picked up a bit and our attendance has gone down."
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