Saying it was time to "reset" for a new era, Defense Secretary Chuck Hagel recommended shrinking American forces from 520,000 active duty troops to between 440,000 and 450,000.
In a speech outlining the proposed defense budget, he said Monday that after Iraq and Afghanistan, US military leaders no longer plan to "conduct long and large stability operations."
If approved by Congress, the Pentagon move would reduce the army to its lowest manning levels since 1940, before the American military dramatically expanded after entering World War II.
The proposed 13 percent reduction in the army would be carried out by 2017, a senior defense official, who spoke on condition of anonymity, told AFP.
The spending plan is the first to "fully reflect" a transition away from a war footing that has been in place for 13 years, Hagel said at a press conference.
The plan comes amid growing fiscal pressures and after years of protracted counter-insurgency campaigns, which saw the army reach a peak of more than 566,000 troops in 2010.
Having withdrawn US forces from Iraq in 2011, President Barack Obama has promised to end America's combat role in Afghanistan by the end of this year.
The proposed cut in manpower along with plans to retire some older aircraft and reform benefits for troops could run into stiff resistance in Congress.
A senior US military officer, speaking on condition of anonymity, acknowledged the political challenge.
"We're going to need some help from our elected representatives to get this budget across the finish line," the officer said.
Several members of the Senate Armed Services Committee immediately expressed reservations about the budget proposal.
Republican Senator Roy Blunt of Missouri, who sits on the committee, said the proposals had the "potential to harm America's military readiness."
The Pentagon had previously planned to downsize the ground force to about 490,000.
But Hagel warned that to adapt to future threats "the army must accelerate the pace and increase the scale of its post-war drawdown."
Hagel also said the army national guard and reserves would be cut by five percent.
The smaller force would entail some "added risk" but it would still be able to defeat an adversary in one region while also "supporting" air and naval operations in another, he said.
The Pentagon for years had planned to ensure the army could fight two major wars at the same time but that doctrine has been abandoned.
Even under the planned reductions, the US Army will remain one of the largest in the world and the American military's budget still dwarfs other countries' defense spending.
While the army will see troop numbers drop, the military's elite special operations forces will be increased to 69,700 -- up from 66,000 currently.
- Retiring old aircraft -
The proposed budget also calls for scrapping the Air Force's entire fleet of A-10 "tank killer" aircraft and retiring the storied U-2 spy plane that dates back to the 1950s.
The A-10 enjoys backing from some lawmakers but commanders want to invest in the new hi-tech F-35 fighter jet and the unmanned Global Hawk surveillance drone.
The budget would reduce the US Navy's planned fleet of littoral combat ships, a small vessel designed for coastal waters that faces questions about its reliability.
Instead of 52 LCS ships, the budget calls for building only 32 and requires the navy to study developing similar ships with heavier weapons and tougher defenses.
Venturing into politically sensitive territory, Hagel called for slowing growth in pay and benefits -- which make up nearly half the Pentagon's budget -- and closing more bases in the United States.
Lawmakers have long resisted base closures or any reform of pay, pensions or other benefits.
Military spending doubled after the attacks of September 11, 2001 but has started to decline as lawmakers push to slash government budgets.
Under a bipartisan accord adopted in December to avert automatic spending cuts, the Defense Department will have a $496 billion budget for fiscal year 2015.
But the Pentagon is backing a $26 billion "opportunity" fund that would bolster training and other programs.