Ministers announced on Thursday morning that the maximum stake for fixed-odds betting terminals (FOBTs) will be slashed from £100 to £2.
The move will be welcomed by Church of England leaders including Archbishop of Canterbury Justin Welby, who previously warned the machines cause "great harm".
Terminals currently allow punters to place bets of up to £100 up to every 20 seconds.
The culture secretary Matt Hancock came under significant pressure to introduce a new cap a stakes, amid concerns for people experiencing a serious gambling problem.
The proposal prompted strong opposition from bookmakers, with William Hill warning such a move could jeopardise 20,000 British jobs and see the Treasury forfeit £1 billion in taxes.
A review by the gambling regulator earlier this year recommended that the maximum stake of FOBTs should be set at £30 or below.
Mike Dixon, chief executive of drug and alcohol charity Addaction, said: ""This is a big and important change for many people we work with.
"Matt Hancock deserves real credit for taking this decision.
"It will change a lot of people's lives, and stop gambling companies preying on people when they're most vulnerable."
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