Welsh independence is one of the options to be considered by a commission examining Wales' future relationship with the rest of the UK.
The new body, set up by Welsh Labour ministers, will look at how the current system of powers resting in Cardiff and London could change.
Co-chairwoman Prof Laura McAllister said "everything has to be on the table".
But the Conservatives accused ministers of wasting time and resources.
Prof McAllister will lead the new Independent Constitutional Commission alongside ex-Archbishop of Canterbury Rowan Williams.
They do not believe Wales' current constitutional arrangements are sustainable, and plan to talk to people around the country.
Welsh Labour, which supports Wales remaining part of the UK, had promised to form the body in its Senedd election manifesto.
Plaid Cymru said the commission would give the opportunity to hold the "most wide-ranging national conversation about Wales' future".
How does Wales work now?
Currently many important areas of government policy such as health, education and local government are run from Cardiff, with such laws made in the Senedd Cymru - Welsh Parliament.
Everything else, like the army and broadcasting, is governed by Westminster. It is a similar set up to Scotland and Northern Ireland, where even more is devolved.
But concerns over the future of the UK have led some, like First Minister Mark Drakeford, to call for a more radical restructuring of the UK.
Mr Drakeford has argued that the union of the United Kingdom would be more secure if more policies relating to Wales and elsewhere were decided locally, and if the UK's nations were part of a voluntary union.
That was echoed in Welsh Labour's manifesto, which expressed support for "far-reaching federalism" within the UK.
But Laura McAllister said the commission would look at a "whole suite" of potential solutions.
'Ludicrous' not to look at independence
The announcement from the Welsh government said the commission will develop options for reform "of the constitutional structures of the UK in which Wales remains an integral part".
However, Prof McAllister said the commission would look at independence.
"I think everything is supposed to be on the table, quite rightly. So it would be ludicrous to remove any options at this stage," she said.
"It's important to be clear about language.
"Independence means different things depending on different contexts."
Prof McAllister denied that constitutional reform was a distraction from practical issues like the pandemic recovery or climate change.
"We won't be taking any attention away from that because we're an independent commission," she argued.
Swansea-born Dr Rowan Williams, who led the Church of England from 2002 until he retired in 2012, said the commission would be addressing "urgent" questions about how to "make a democracy fit for purpose".
"At the moment we have a four-nations model which is pretty imbalanced," Dr Williams said.
"Devolved government is something which has been, to some extent, tacked on to an extremely centralised system.
"It's time we thought through what the implications were for working better for the people of Wales and the people of the UK."
He said he wanted to see "grassroots buy-in" to the process from Welsh people.
Prof McAllister added: "I don't think it's going to be an easy task but Rowan and I will put our backs into making sure we listen to every community and every individual who wants to give us their take on how Wales should be governed."
Rhys ab Owen, Plaid Cymru constitution spokesman, said: "A constitutional commission is an opportunity to hold the most wide-ranging national conversation about Wales' future in the history of devolution.
"Plaid Cymru looks forward to engaging constructively with the commission and its work, making use of every opportunity it presents to make the case for independence and that our nation's interests will be best served when decisions over Wales' future are placed in Wales' hands."
But his Welsh Conservative counterpart, Darren Millar, said: "People in Wales overwhelmingly rejected independence at the recent Senedd elections; and why the Welsh government would want to waste its time and resources discussing the topic is beyond me.
"Instead of prioritising discussions on independence and constitutional change, the Welsh Labour government should be using the powers it already has to get to grips with the challenges facing Wales."
The issue of Scottish independence and the new legal framework required in the wake of Brexit have brought to a head the question of how the different governments of the UK should relate to each other.
The push and pull of power struggles between those governments - all of different political hues - is the subtext to many of the policy and spending decisions we hear about on a daily basis.
If the gamut of possible recommendations runs from the status quo to full-blown Welsh independence, the likely outcome may well end up being something in the middle of that spectrum.
But for any meaningful constitutional change to result from this, the UK government would have to support it.
Right now, there's no sign of that.