The European Commission set a Tuesday deadline for the yard to find a way to cut capacity, and avoid having to repay state subsidies that could trigger bankruptcy.
The yard is set to be privatised and either a Ukrainian or Italian company will buy a majority stake under the plan.
Pawel Poncyliusz, the deputy economy minister, said that if Poland agreed to the EU's demands, the shipyard would become insignificant.
The EU has demanded Gdansk close two of its three slipways.
Rzeczpospolita, a Polish newspaper, reported Warsaw had agreed to the demand.
"If we agreed to EU requests and left just one dock, then in the year 2010 Gdansk Shipyard would be a tiny business, not a shipyard anymore," Poncyliusz said.
The plan sent to Brussels proposes a cut in capacity until 2014 and privatisation of the yard.
Struggling to survive
In 1980, what were known as the "Lenin Shipyards" in Gdansk became the birthplace of the Solidarity union, whose protests helped spark the fall of communism in Poland.
Once thriving, mainly thanks to orders from the Soviet Union, Gdansk's shipyard is struggling to survive despite millions of Euros in subsidies it received when Poland joined the EU in 2004.
Poland may have to reimburse the aid if it does not come up with a satisfactory solution.
EU rules state that government subsidies for ailing shipyards can only be given if they agree to a complete restructuring plan aimed at making them economically viable.
Economic viability
Amelia Torres, the EU Commission spokeswoman, said Poland's proposals were being looked at.
"What the Commission wants to see, of course, is not a closed Gdansk shipyard but a genuine, far-reaching restructuring of the company which will ensure its long-term viability.
"We are perfectly aware of the historical importance of the Gdansk shipyard.''
About 3,000 people work at the shipyard and trade unions have said there may be protests.
In August 1980, massive strikes led to the creation of Solidarity – the first free trade union in Soviet-controlled Eastern Europe.
Lech Walesa, who headed the movement, said the shipyard is "the mother of free Poland."
Today, Polish yards face tough competition from better-equipped western European shipyards and also from Asia.
Employees at Gdansk, some of whom worked there during the rise of Solidarity, fear for the future of the workforce.
"We don't know what will happen today, tomorrow or in a week," said Tadeusz Zbik, who has worked at the yard for 20 years.
"We are very nervous all the time because we have no idea ... if we will keep our jobs."
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