Over 5,000 health service jobs are to be cut as part of a drive to halve the number of NHS quangos.
The cuts could pay for 20,000 extra nurses
Health Secretary John Reid said the cuts would be phased in over the next four years.
In a statement to MPs, he said 21 of the 42 NHS quangos will be abolished or merged. Officials will announce what bodies will be scrapped in June.
Mr Reid believes the move could free up £500m, which could pay for four new hospitals or 20,000 more nurses.
The quangos, which are nominally independent but rely on government funding, have a combined staff of 22,000 people with budgets totalling £2.5 billion.
They include watchdogs, like the Healthcare Commission and the National Institute for Clinical Excellence, and regulators, like the Human Fertilisation & Embryology Authority and the General Social Care Council.
However, it is not yet clear which bodies will be affected by the cuts.
Mr Reid said many of the existing bodies overlapped and had the same roles.
"There is considerable scope for improving efficiency and reducing bureaucracy," he said.
Some of the bodies believed to be vulnerable were set up within the past few years by the Labour administration.
Mr Reid said merging or scrapping these bodies would free up money, which could be used elsewhere in the NHS.
"Changes on this scale will enable considerable extra resources to be re-deployed to the frontline.
"For example, another £0.5bn would provide for four new hospitals, or 20,000 more nurses, or 6,250 consultants or 7,500 general practitioners."
Mr Reid said the final stage of the review will be completed "as soon as possible" and that an announcement would be made by the end of June.
The proposed job losses come on top of a planned 1,400 cuts at the Department of Health.
It also follows a report for the government, published in February, which suggested £15bn could be saved each year by cutting 80,000 civil servant jobs.
Shadow Health Secretary Tim Yeo said: "It is difficult to take today's announcement seriously as Labour created more than half of the quangos they now say they want to cull and are reviewing bodies that are not even operational.
"Reid's statement is a critique of how badly Labour has managed the NHS. The quangos they created have overlapping functions and cost the taxpayer £2.5bn each year to run."
Liberal Democrat Health spokesman Paul Burstow welcomed the move.
"Slimming down the Department of Health is necessary but alone is not sufficient to tackle the culture of NHS targets and tickboxes. There also needs to be a bonfire of red tape.
"It's high time that the NHS became more accountable at a local level. Such a change would make the NHS more responsive and would bring healthcare closer to home."
Rosey Foster, acting chief executive of the Institute of Healthcare Management, said: "The IHM is in full support of targeting resources at the front line of patient care.
"However, given the likely loss of so many bodies which advise and guide organisations in health and social care, it will be essential that the professional development of healthcare managers at ground level is recognised as a resulting need."