In June, the government in England said agency spending was to be capped and it has now unveiled details of how that will work.
From April, NHS trusts will not be able to pay more than 55% more to agencies than it costs to pay a member of staff for a shift.
It comes amid mounting pressure on NHS finances.
Figures released last week showed trusts had overspent by £930m in the last three months - with agency spending highlighted as one of the biggest factors.
Ministers believe the move will save £1bn by April 2018 - the equivalent of shaving 10% from the £3.3bn annual agency bill.
Reports have emerged of agencies being paid thousands of pounds to supply nurses and doctors for shifts.
The new limit will start to be phased in from November - with the "shift rate plus 55%" limit kicking in in full from April.
Agencies are being allowed to charge more to reflect the costs they face in terms of administration and National Insurance contributions.
Health Secretary Jeremy Hunt said: "For too long, staffing agencies have been able to rip off the NHS by charging extortionate hourly rates which cost billions of pounds a year and undermine staff working hard to deliver high-quality care.
"The tough new controls on spending that we're putting in place will help the NHS improve continuity of care for patients and invest in the front line - while putting an end to the days of unscrupulous companies charging up to £3,500 a shift for a doctor."

Media playback is not supported on this device
Keetels, a member of the victorious 2014 World Cup team, fired low past Maddie Hinch in the fourth quarter after two shots had been blocked.
England won several penalty corners, but were frustrated by a resilient Dutch defence.
Alex Danson did go close though with a shot saved by keeper Anne Veenendaal.
Danson's team-mate Sophie Bray also went agonisingly close to scoring as she failed to convert Zoe Shipperley' low driven pass.
Keetels said: "It was amazing. I'm so happy. The English attacked and defended well.
"We are enjoying the pressure. The crowd is all orange so it feels like an extra player on the field."
The home nation will play neighbours Belgium in Saturday's final. England will take on Germany for the bronze medal prior to that match.
England play Netherlands again, this time in the men's semi-finals on Friday (19:00 BST).

Djokovic beat Japan's Kei Nishikori in his quarter-final match in straight sets, 6-3, 6-2, 6-4.
He admitted after the match that he hadn't practiced before his match because he'd played five sets against Gilles Simon.
"I was determined, focused. In important points and moments I managed to stay composed and make him play an extra shot," he said.
Ministers have set out details of how they aim to save the NHS £1bn on agency staff costs over the next three years.
[NEXT_CONCEPT]
England's hopes of defending their EuroHockey title were thwarted at the semi-final stage as Marloes Keetels' strike sent hosts Netherlands through.
[NEXT_CONCEPT]
World number one Novak Djokovic will play Roger Federer in the men's semi-final at the Australian Open.