The amount people can stake on fixed-odds betting terminals (FOBTs) will be slashed to £2 to reduce the risk of "gambling-related harm", the Government has announced.
It said the move will cut the risk of potentially large financial losses from the controversial machines as well as harm to both players and wider communities.
The decision goes further than the recommendations of a review carried out by the gambling regulator earlier this year, which recommended the maximum stake for FOBTs should be set at or below £30.
Culture Secretary Matt Hancock said: "When faced with the choice of halfway measures or doing everything we can to protect vulnerable people, we have chosen to take a stand.
"These machines are a social blight and prey on some of the most vulnerable in society, and we are determined to put a stop to it and build a fairer society for all."
The decision is set to please campaigners but will come as a blow to bookmakers, which have warned it would cost betting shop jobs across the country.
FOBTs - dubbed the "crack cocaine" of gambling - can lead to punters placing bets of up to £100 every 20 seconds.
Tracey Crouch, Minister for Sport and Civil Society, said they can "devastate individuals' lives, families and communities".
She added: "It is right that we take decisive action now to ensure a responsible gambling industry that protects the most vulnerable in our society.
By reducing FOBT stakes to £2 we can help stop extreme losses by those who can least afford it.
"While we want a healthy gambling industry that contributes to the economy, we also need one that does all it can to protect players."
Bookmaker William Hill branded the decision a "tough challenge" and warned it could see around 900 of its betting shops become loss-making, with a "proportion" at risk of closure after the new £2 limit comes into effect.
The group said the stake cut could also hit annual earnings by between £70 million and £100 million, given that it is estimated to reduce its total gaming net revenues by as much as 45%.
The firm has already recently cautioned the stake cut could leave it at risk of a foreign takeover and jeopardise 20,000 British jobs.
Philip Bowcock, chief executive of William Hill, said: "The Government has handed us a tough challenge today and it will take some time for the full impact to be understood, for our business, the wider high street and key partners like horseracing.
"We will continue to evolve our retail business in order to adapt to this change and we will support our colleagues as best we can."
The Government has also tasked the Gambling Commission to hold talks with the industry on potential limits on spend and time on other so-called B1 and B3 gambling machines in casinos and arcades.
It also confirmed a raft of measures to clamp down on the sector, including plans to toughen up protections around online gambling, such as introducing stronger age verification rules and affordability checks.
A multimillion-pound advertising campaign promoting responsible gambling, supported by the industry and GambleAware, will be launched later this year, it added.
And the age limit for playing National Lottery games will be reviewed under the next licence competition.
The Government said it will fund the crackdown through an increase in remote gaming duty.
It pledged to work with the gambling sector to ensure it has sufficient time to introduce the stake reduction and technological changes.