Le Pen announced the proposed change at a party conference in northeast France, arguing that it needed to drop its historic name of the National Front (FN), used since 1972 when it was co-founded by her father Jean-Marie.
The switch is meant to signal a new beginning and a decisive break from the toxic legacy of Jean-Marie Le Pen, a former paratrooper who has a long history of making racist and anti-Semitic remarks.
The party severed the last tie by stripping him of an honorary title on Sunday, the final act in a vitriolic and highly personal power struggle with his daughter, who took over the party in 2011.
Marine Le Pen said the National Front name was "associated with a glorious and epic history that no one can deny", but the 49-year-old added it was also an impediment that prevented the party winning power in elections.
"For a lot of French people... it's a psychological barrier," she said.
Her efforts to distance the party from its association with racism were dealt an immediate blow, however, when the deputy leader of the National Front youth movement was suspended for offensive remarks.
Davy Rodriguez, who is also a parliamentary assistant for the party, was filmed apparently calling a bouncer at a bar in Lille a "black piece of shit" during a drunken late-night dispute on the eve of the party conference.
He was suspended on Sunday in a decision that was approved by Le Pen, a party source told AFP. Rodriguez admitted to an argument but told the Buzzfeed website that the video was a fabrication.
Le Pen won a historic 10 million votes in last May's run-off presidential election which she lost to Emmanuel Macron, but her score of 34 percent was lower than expected and she has admitted to mistakes during her campaign.
Since then, she has struggled for authority in the FN.
Her top campaign aide Florian Philippot has quit to start a rival far-right party, while her popular niece, Marion Marechal-Le Pen, is taking time out from politics.
Macron's tough immigration policy, which he has promised will lead to more deportations and stricter vetting of newcomers to France, also risks taking the sting out of an issue which has driven support for the far right for 40 years.
Still Le Pen was re-elected for a third term as party chief on Sunday after standing unopposed for the position.
Trump, who had campaigned touting similar views on immigration, Islam, trade, the European Union and Russia, came close to endorsing Le Pen as she sought to defeat Macron last year.
"Let them call you racists, let them call you xenophobes, let them call you nativists. Wear it as a badge of honour. Because every day we get stronger and they get weaker," Bannon told the crowd.
The presence of the former head of far-right Breitbart News drew a stinging response from Macron's government.
"The king of fake news and of white supremacists at an FN summit... why am I not surprised?" remarked parliamentary affairs minister Christophe Castaner, who also heads Macron's centrist Republic on the Move party.
"Change of name but not of the political line."
Former top aide Philippot on Sunday also heaped scorn on Le Pen for inviting Bannon, saying "even Trump got rid of him for extremism."
Radical left leader Jean-Luc Melenchon said for his part that by proposing the name change Le Pen "is dreaming of being a party like the others".
Le Pen's proposal does not have unanimous grassroots support.
The FN canvassed 51,000 members last year about whether it should change its name and on Saturday it emerged that just 52 percent had voted in favour among the 30,000 who responded.
That compared with 90 percent of respondents wanting a referendum on continued EU membership and 98 percent wanting to cut immigration to France.
FN members are to be asked to vote on the proposed National Union name and Le Pen has promised to abide by their decision, which will be made public in six weeks.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
Get Breaking news, live coverage, and Latest News from India and around the world on NDTV.com. Catch all the Live TV action on NDTV 24x7 and NDTV India. Like us on Facebook or follow us on Twitter and Instagram for latest news and live news updates.