Heritage Minister James Moore said the rebranding of the museum comes in anticipation of plans to celebrate the 150th anniversary of Confederation in 2017.
The museum is expected to include displays on major milestones since Confederation, including the Last Spike from construction of the Canadian Pacific Railway, Montreal Canadiens legend Maurice (Rocket) Richard's hockey jersey and items from Terry Fox's Marathon of Hope.
"Canadians deserve a national museum that tells our stories and presents our country's treasures to the world," said Moore at the museum, which is in Gatineau, Que., across the Ottawa River from Parliament Hill.
"Our children need to know more about Canada's past," said Moore.
$25M to be single federal investment
About 50,000 square feet of the museum, about half of its permanent and temporary gallery, is expected to be renovated as part of the change.
The Museum of Civilization's First Peoples Hall, a permanent exhibit of aboriginal artifacts from across Canada, is expected to remain where it is, as will areas such as the children's gallery and IMAX theatre.
The transformation is expected to cost a one-time investment of $25 million funded through Canadian Heritage. There is also a $3-billion budget for the movement of exhibits and artifacts from other smaller museums across Canada, Moore said.
Moore said the federal government will introduce changes to the Museums Act to change the name and mandate of the museum.
The Museum of Civilization's current mandate is defined in the Museums Act as:
New museum part of Conservative 'spin machine,' Liberals say
Moore said he spearheaded the Canadian Museum of History idea, something he has pondered since he became the heritage minister. In a one-on-one interview with the CBC's Sandra Abma, Moore said his department went to the museum with the idea and they supported it.
But opposition parties were not in favour of investing money in museum renovations and have accused the Tories of spending money during tight times.
Liberal heritage critic Scott Simms said the plan would "turn the museum into a subsidiary of the Conservative Party spin machine."
NDP heritage critic Andrew Cash and Green Party Leader Elizabeth May also expressed concern about spending on museums while budget cuts are made to environmental research.
"What we're doing right now is picking those things — Mr. Harper's good at cherry-picking those things — that create a feel-good atmosphere across Canada while our country's disappearing out from under our feet," May said in question period on Tuesday.
Museum attracts 1.2 million visitors annually
CBC News has learned the changes have the support of museum staff, the board of directors and architect Douglas Cardinal, who designed the museum building.
The change follows from one of the strategic directions approved by the museum's board of directors in 2009.
It called for the museum to broaden its national collections and its curatorial research "to better reflect and present national narratives, symbols and achievements through the human, social, cultural, military and political history dimensions of Canadian life."
The Canadian Postal Museum, which has existed as a separate entity inside the Museum of Civilization, will close. Its artifacts will be integrated as exhibits at the new museum of history.
The Museum of Civilization, previously called the National Museum of Man, is the most popular museum in the National Capital Region, attracting about 1.2 million visitors annually.