Patients will be given a wider choice of who provides their care from next year.
From next April, patients will be able to choose who provides their mental health and community NHS services, the government said.
This could include private companies, charities and voluntary organisations, Health Secretary Andrew Lansley said.
Announcing the plans Mr Lansley said it was a "big day for patients."
The move means that by next September, patients should be given a choice of at least three community services in eight areas which could include treatment of back pain, hearing and talking therapies.
But the move has been criticised by opponents, who say the decision represents the increased privatisation of the health service.
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