Campaigners have welcomed the investigation
Large pay-offs to departing council chiefs who start work soon afterwards at a new local authority are to be reviewed by the spending watchdog.
The Audit Commission is to look into pay-offs to council chiefs, some of whom are reported to have left after clashing with political leaders.
Ministers said that was not acceptable and public money must be protected.
Recent payoffs include John Foster, who got a £545,000 pay and severance deal when he left Wakefield Council in 2008.
Within months he had been appointed chief executive of Islington Council on a salary of more than £200,000.
Martin Smith, the chief executive of Tower Hamlets, is said to have received a package worth about £500,000 this year, reportedly after falling out with council leader Lutfur Rahman.
The council disputes the figure but would not confirm what package he had received.
Mr Smith said in a statement at the time he had enjoyed working with successive council leaders.
Mr Rahman praised him but said a "fresh approach" was needed and it had been agreed it was an "appropriate time for him to move on".
Communities Secretary John Denham has asked the Audit Commission, which is responsible for monitoring public spending, to look at why chief executives are getting such generous pay-offs and whether more robust procedures are needed to protect the taxpayer.
He said: "It's not acceptable for town hall chiefs and council leaders to agree expensive deals to part company just because they don't get on or because they'd prefer to work with someone else.
"If a chief executive, who has served his or her administration well, yet leaves for no justifiable reasons, it does not mean a council should spend large amounts of taxpayers' money just to move them on to the next council so they can then find a more favoured face.
"In the current climate, every taxpayer's pound must be made to go further and councils must show they are providing value for money with services, with salaries and with tough decisions about their corporate executives."
The Society of Local Authority Chief Executives said in many cases the taxpayer was being forced to foot the bill because of the whim of a council.
And the Audit Commission's chairman, Michael O'Higgins, said evidence from recent years suggested that the trend for councils to headhunt other authorities' chief executives was fuelling higher wages and extra costs.
"We will look at the regulations in the light of our study and what district auditors report," he said.
Earlier this year, the Conservatives pledged to end the "age of excess" in public sector pay and said those public sector bosses who earned more than the prime minister would be asked to justify themselves to the Treasury.