A presidential decree, published by Ukrinform news agency, constitutes the first major step undertaken by Kuchma as part of a program to introduce market reforms.
The program was drawn up with the approval of the International Monetary Fund, which last month approved an initial credit of $371 million.
The decree urged local councils to speed up transfer of land to private hands.
It said landowners could sell, let or bequeath their land to Ukrainian citizens, provided they did not change its primary purpose.
Communists had resisted all plans to legalize sale of land.
They hold about 90 of parliament's 450 seats, while other leftists with similar views have a further 60 to 70.
"Private ownership of land is perhaps the most important step in carrying out land reform," First Deputy Prime Minister Viktor Pynzenyk said after the decree was published.
"Today, everyone understands that if such an initiative is not undertaken, nothing can go forward."
Kuchma's reform program was adopted about 100 days after he took office.
It is the first to take place in post-Soviet Ukraine nearly three years after independence.
Reforms in Ukraine lag far behind neighboring Russia and living standards in the country have fallen much more sharply.
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