Under the proposal, one company will operate as a newspaper and book publisher, while the other will be an entertainment company that includes the 20th Century Fox movie studio, the Fox broadcast TV network and the Fox News channel. It may take a year to work out the details.
The Murdoch family, which controls nearly 40 percent of the voting shares in News Corp., is expected to maintain control of both companies.
Rupert Murdoch said in a conference call with investors that a split would result in two strong companies that are better managed and poised for growth.
"We've come a long way in our journey that began nearly 60 years ago with a single newspaper operating out of Adelaide," Murdoch said, referring to the single Australian newspaper he inherited from his father and became the foundation for News Corp.
"Each of these new companies would have the potential to continue that journey and prosper as an independent entity long into the future."
The split of News Corp. is a symbolic turning point for its 81-year-old media mogul. Through the years, Murdoch maintained a fondness for newspapers even as he purchased entertainment companies. In hearings last summer before U.K. lawmakers, he conceded that he regularly called newspaper editors under his employ with the greeting: "What's doing?"
Investors have already given their blessing to the split, having pushed shares of the company's Class B stock up 10 percent since the news of the plan broke early Tuesday. The shares edged down 23 cents to $22.18 in morning trading Thursday.
Under the current proposal, News Corp. shareholders will receive one share of common stock in the new company for each share of News Corp. that they currently hold. Each company would maintain two classes of stock.
Murdoch will serve as chairman of both companies and CEO of the media and entertainment company. The company said it plans to put together management teams and boards for both businesses over the next several months.
While News Corp.'s board unanimously approved pursuing a split, it will still need to approve any formal proposal. The deal is also subject to shareholder and numerous regulatory approvals.
News Corp. said it plans to hold a meeting of its shareholders sometime in 2013 and expects the deal to be completed in about a year.
Analysts relished the prospect that the faster growing pay TV segment would be valued more highly by new investors who weren't willing to buy shares in a company being dragged down by a newspaper industry in decline.
The publishing company, which will include The Wall Street Journal, is expected to be the much smaller of the two, with some analysts valuing it at about $5 billion, compared with the current market value for News Corp. as a whole of about $54 billion.
Murdoch emphasized on the call that the split doesn't mean that he's giving up on his publishing business, noting its "very strong" balance sheet and "robust" net cash position.
"The opportunity is so big, a single-minded pursuit is the best approach," Murdoch said. "Our aim is nothing less than this to create the most ambitious well-capitalized and highly motivated news and publishing company in the world."
Still, many analysts had questions about which entity would bear the financial risks of the ongoing U.K. probe into phone hacking and bribery. Besides legal costs, News Corp. also faces potential fines in the U.S. under the Foreign Corrupt Practices Act, which punishes companies that have bribed officials abroad.
Breaking off the newspaper and book publishing assets into a separate company makes them more "bite size" and ripe for being taken private by a third party, according to Needham & Co. analyst Laura Martin.
It is unclear if the split will appease the British telecommunications regulator, Ofcom, which is reviewing whether British Sky Broadcasting - of which News Corp. holds a 39 percent stake - is "fit and proper" to hold a broadcasting license. Ofcom is expected to wrap up its review later this summer.
British authorities have been probing allegations that News Corp. journalists at its now-shuttered News of the World and other papers hacked into phones and bribed public officials to gain exclusive information.