The White House issued a statement detailing key changes to the country's metadata-collection laws. The reforms mean in the absence of an "emergency situation" an intelligence agency will have to get permission from the US Foreign Intelligence Surveillance Court (FISC) to collect a specific number of records.
The data will also now be stored with the phone companies involved, not the agency. The companies will, however, be required to provide "technical assistance to ensure that the records can be queried and that results are transmitted to the government in a usable format and in a timely manner".
The proposed changes still need to be approved by US Congress and will require new legislation to be fully implemented. This means the existing intelligence program will continue for at least 90 more days.
The White House said it hoped the move would help restore trust in the US government.
"The president made clear that he was ordering this transition to give the public greater confidence that their privacy is appropriately protected, while maintaining the tools our intelligence and law enforcement agencies need to keep us safe."
US president Barack Obama promised to examine the National Security Agency's (NSA) spying powers during a speech in January. The reforms are designed to address concerns about the NSA's PRISM spying operations.
The PRISM campaign was revealed when ex-CIA analyst Edward Snowden leaked documents to the press proving that the NSA collected vast amounts of metadata from numerous technology and telephone companies. The leaked documents showed that the NSA was collecting as many as five billion phone records every day from citizens across the world.
The huge amounts of data being collected caused suspicion towards American industry and led the European Commission to consider a sweep of reforms designed to protect businesses operating in the region from US intelligence agencies. European Union (EU) justice commissioner Viviane Reding called for new legislation to offer consumers more control over how and where companies store their personal data earlier in March.