The presidents of the schools made the decision at their annual meeting in Philadelphia.
The league's coaches had fought for the inclusion of all the teams since the league expanded to its current size and only 12 were brought to New York for the tournament.
The expansion is for both the men's and women's tournaments.
"Our presidents performed a very thorough review of the tournament format," commissioner Michael Tranghese said. "After extensive deliberation, it was decided that inviting all teams to participate would provide a special opportunity to every men's and women's basketball student-athlete."
The new format will mean adding an extra day to the men's tournament played at Madison Square Garden and the women's which is played at Hartford Civic Center.
Teams seeded ninth through 16th will meet on the first day. The four winners will advance to play seeds 5 through 8. The top four seeded teams will still receive a bye to the quarterfinals where they will meet the winners of the second day's games.
WISCONSIN-MILWAUKEE: Scoring leader Avery Smith was tossed off the team Wednesday, a day after his suspension.
Panthers coach Rob Jeter suspended Smith for an unspecified violation of team rules a half hour before Milwaukee opened its season by beating Wisconsin-Parkside in an exhibition game Thursday night.
"It has become clear we need to move forward as a team and a program without Avery," Jeter said in a statement. "I've focused a lot on team chemistry and togetherness and now it is time to move into the season with a group that is committed to those ideas."
Smith averaged 15.5 points last season and was on the Horizon League's preseason all-conference team this year.
Milwaukee opens its regular season Friday against Upper Iowa.