It means that at the next general election in 2020 the Scottish and UK parties could have conflicting policies on major issues, including defence and taxation.
Ms Dugdale insisted voters would understand the different positions and said that Labour needs to become a federal party.
However, some English MPs are furious over the plans. They fear it will lead to a chaotic, confused message at the election and undermine the principle of a unified party membership.
But while admitting there “will be challenges” which need to be resolved, Ms Dugdale said the party had to change to reflect the devolution settlement .
She told a press briefing that European parties which form coalitions have different policies which then need to be reconciled and “there will be a process to sort things out”. She told Labour MPs at a private meeting: “Labour is the party of devolution but we didn’t devolve ourselves. We need to learn from our mistakes. This isn’t change for the sake of it. A Scottish Labour Party with more autonomy will make us fit for the future so we can do a better job of holding the SNP Government to account and, more importantly, to ask people to put their trust in us once again.”
But one senior party figure told The Scotsman: “This has gone down very badly. If we lose common membership and common policy platform on a UK level it will be a disaster.” Another said the changes would “just lead to confusion for voters.”
A Scottish Tory spokesman said: “Six months before the next Scottish elections, Scottish Labour is preparing to launch a bitter internal row over its internal structure, at a time when it should be setting out its plans for Scotland. Whatever new structure it comes up with, this is old Labour – divided, chaotic and consumed with its own internal difficulties.”