, which was acquired by CBS for $280m (£141m) last year, has agreed deals with the big four music publishers and around 150,000 independent labels to increase downloads through Amazon, iTunes and other legal download sites.
The overhaul will move the site away from its current ad-funded model to one that generates income through download sales.
Record labels will receive a small royalty every time one of their artist's tracks is streamed on the site, while unsigned acts will be able to generate income when their songs are played.
The site, which was founded in 2002, allows users to compile online playlists of songs from a searchable archive of 3.5m songs.
It had previously allowed users to listen to tracks as many times as they wanted, but that service will now be limited to three plays before a download option is offered.
Users wishing to listen to tracks more than three times will be offered a monthly subscription fee.
The changes will dismay some regular Last.FM users, who have become accustomed to its free unlimited streaming. They are being viewed as a compromise by the site's owners to satisfy the paid-for download demands of record labels.
Quincy Smith, president of CBS's interactive unit, said: "[Record labels] want a subscription-based service more and they want downloads.
"I want to pay attention to users, and the first thing the users want is free streaming."
A message to Last.FM users on the site's by Richard Jones, co-founder of the site, described the changes as "something we've wanted to do for years", while maintaining commitment to allowing users to listen to tracks online for free, "the way it should be".
Jones said: "During this initial public beta period, each track can be played up to three times for free before a notice appears telling you about our upcoming subscription service.
"The soon-to-be announced subscription service will give you unlimited plays and some other useful things. We're also working on bringing full-length tracks to the desktop client and beyond."
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