Centred around a new, condensed structure of 84 units, the reshuffle builds on Mr Xi's years-long efforts to modernise the PLA with greater emphasis on new capabilities including cyberspace, electronic and information warfare.
As chair of the Central Military Commission, Mr Xi is also commander-in-chief of the armed forces.
"This has profound and significant meaning in building a world-class military," Mr Xi told commanders of the new units at the PLA headquarters in Beijing, the official Xinhua news agency said in a report late on Tuesday.
All 84 new units are at the combined-corps level, which means commanders will hold the rank of major-general or rear-admiral, the official China Daily reported on Wednesday, adding that unit members would likely be regrouped from existing forces given the military was engaged in cutting its troop strength by 300,000, one of a range of reforms introduced by Mr Xi in 2015.
Those reforms include establishing a joint operational command structure by 2020 and rejigging existing military regions, as well as streamlining troop numbers particularly in non-combat roles.
The previous seven military area commands were regrouped into five, and the four military departments, staff, politics, logistics and armaments, were reorganised into 15 agencies last year. The 84 units will come under the 15 agencies.
Retired PLA Major-General Xu Guangyu, a senior researcher at the Beijing-based China Arms Control and Disarmament Association, said the restructure represented the second major phase of Mr Xi's reforms.
"Since military reforms started it has been one step at a time," Mr Xu told news agency Reuters. "The high-level framework is now in place, now this is the second phase targeting the entire mid-ranking levels of the military."
With details on the reform limited, foreign military analysts are still guessing at the impact it could have on the PLA's fighting capabilities.
"They would be small enough to be very transportable, agile," Mr Bitzinger said.
Observers see China consistently taking cues from the US armed forces as it modernises.
If similar to trends in US military organisation, Mr Bitzinger said the new Chinese units could be equipped to be self-sufficient, possibly with their own intelligence units, artillery, engineers, or other capabilities.
But he said it would likely take time for any changes to be effectively implemented.
Beijing also has been moving rapidly to upgrade its military hardware as it grows increasingly assertive about its sovereignty claims in the South China Sea, and as it seeks to expand its military influence overseas.
Chinese media reports have speculated that the country's second aircraft carrier - and its first built at home - will be launched on Sunday, the navy's founding anniversary.
Mr Xi has also made rooting out corruption in the military a top priority. Dozens of senior officers have been investigated and jailed.
(Reporting by Philip Wen and Michael Martina, Editing by Michael Perry, Robert Birsel)