The move will enable less code to be carried by the hardware, which may also help protect Cisco users from common security attacks that take advantage of loopholes in bulky and sometimes buggy code.
Cisco products are being targeted by hackers. Last month a toolkit for writing code to exploit known vulnerabilities in Cisco systems appeared on the internet.
The modular approach taken by Cisco for its Internetwork Operating System (IOS) follows similar moves by smaller rivals such as Extreme Networks, Avici Systems and Redback Networks.
Explaining the move, Mike Volpi, senior vice-president in Cisco's routing technology group, said, "With modularity you can partition."
Partitioning should lead to greater reliability as bug fixing and upgrades can be done with reduced downtime, users do not have to completely uninstall large amounts of code, and then re-install it, just to fix one problem or add a single feature.
Cisco has not announced the exact timing of the launch of its modular operating system, but it is likely to feature in the company's 20th anniversary celebrations at the end of May.
Cisco plans to launch a modular router for carriers and ISPs at the Supercomm trade show in the US in early June. Mark Bieberich, an analyst at Yankee Group, said modularity should offer users a "decrease in operating costs".