The regulator for construction products will have the power to remove any materials from the market that present a significant safety risk and prosecute any companies who flout the rules on product safety.
The move follows testimony at the Grenfell Inquiry highlighting how insulation manufacturers tried to to game the current system and rig the results of safety tests.
The regulator will operate within the existing Office for Product Safety and Standards department which has been given an additional £10m of funding.
It will have strong enforcement powers including the ability to conduct its own product-testing when investigating cases.
Manufacturers must now ensure that their products are safe before being sold in addition to testing products against safety standards.
Housing Secretary Robert Jenrick said: “The Grenfell Inquiry has heard deeply disturbing allegations of malpractice by some construction product manufacturers and their employees, and of the weaknesses of the present product testing regime.
“We are establishing a national regulator to address these concerns and a review into testing to ensure our national approach is fit for purpose.
“We will continue to listen to the evidence emerging in the Inquiry, and await the judge’s ultimate recommendation – but it is already clear that action is required now and that is what we are doing.”
The government has also commissioned an independent review to examine weaknesses in previous testing regimes for construction products, and to recommend how abuse of the testing system can be prevented.
Chair of the Independent Review of Building Regulations and Fire Safety Dame Judith Hackitt said: “This is another really important step in delivering the new regulatory system for building safety.
“The evidence of poor practice and lack of enforcement in the past has been laid bare. As the industry itself starts to address its shortcomings I see a real opportunity to make great progress in conjunction with the national regulator.”