Thousands of people have been banned from donating blood because of fears over the human form of BSE.
Mr Reid announced the move in the Commons
The ban, announced in the Commons by Health Secretary John Reid, applies to all those who have had blood transfusions since 1980.
It comes three months after Mr Reid revealed that a British man who died from vCJD may have contracted the disease after a transfusion.
The man received blood in 1997 and developed the disease six years later.
The blood was collected long before the donor was diagnosed with the brain-wasting disease.
While there is no proof that the man contracted the disease as a result of the transfusion, a possible link cannot be ruled out.
It was the first reported case of a possible transmission of vCJD through infected blood. Scientists believe that the chances of contracting the disease in this way are tiny.
Mr Reid said the ban was "a precautionary measure" and was about "balancing risks".
"The group of people excluded will be limited to those who confirm they received a transfusion after 1 January 1980," Mr Reid told MPs.
"It is generally accepted that there would have been no exposure to BSE in the United Kingdom before that date," he said.
"The risk attached to this group of blood donors is of course uncertain but we are taking these measures as a precaution. The risk may be slightly higher than for the population as a whole."
A number of countries, including the United States and France, already ban blood donations from people who have lived in Britain.
The NHS does not have the capacity to trace everyone who has had a transfusion since 1980. As a result, the system will depend on people "self reporting" or telling medical staff they have received blood.
About 1.7m people in England and north Wales regularly donate blood. The Department of Health estimates that around 50,000 will be affected by the ban. However, some experts believe the figure could be much higher.
The ban could put pressure on NHS blood supplies. The National Blood Service says it needs 9,000 donations a day to treat patients.
The Department of Health has already ordered NHS hospitals to try to cut back on the amount of blood it uses.
Sir Liam Donaldson, the chief medical officer for England, has been asked to draw up a strategy to ensure the NHS uses blood stocks more appropriately.
Mr Reid urged those who can donate to do so. "The dangers of a shortage of blood are obvious to all," he said. "People who can should continue to donate blood."
The National Blood Service backed the move. "This is a further step in the continuing drive to make blood for transfusion even safer," said Dr Angela Robinson, its medical director.
"However, to ensure that blood supplies remain at adequate levels we will need more donors to come forward today, tomorrow and into the future."
It is likely that similar restrictions will be introduced in Scotland. Health Minister Malcolm Chisholm is expected to make a statement on the issue on Wednesday.
Janet Gibbs, chairwoman of the Human BSE Foundation, backed the government's decision.
"It is the only logical step they can take," she told BBC News Online.
"We support it. It is important that people are protected against this disease."
Gill Turner, national coordinator of the CJD Support Network, also welcomed the ban.
"We are very pleased that the government and National Blood Service are being very vigilant about the possibility of transmission of vCJD in the blood. This precautionary step is very welcome."
Liberal Democrat health spokesman Paul Burstow said: "The risk of infection of vCJD through the blood supply is small. But the government is right to take these precautionary measures."