Clubs taking part in the Champions League and UEFA Cup will have to include at least four homegrown players in their squads from the start of the 2006-7 season.
The quota will increase to six players the following season, rising to a maximum of eight homegrown players by 2008-9.
UEFA defines homegrown players as those who were developed at a club between the ages of 15 and 21, or by other clubs from the same national association for a minimum of three years.
The nationality of a homegrown player is irrelevant but UEFA clearly hope that eventually the changes will lead to a reduction in the number of foreign players playing for clubs.
Sepp Blatter, president of FIFA, has been critical of the wealthier western European clubs for creating what he described as a “high-stakes trade in humans” by using their wealth to acquire players from around the globe.
“The squad must be limited to 25 to stop some of the bigger clubs hoarding players and not playing them. This is totally unacceptable,” Lars-Christer Olsson, chief executive of UEFA said.
“Clubs have a social and sporting obligation and should be a model for lesser clubs in the same region and to set the highest example.”
“Compared to 1995-6 when the Bosman ruling on freedom of movement was introduced, there are now 30 percent less players coming from one country playing for their clubs in that country in the top division,” Olsson said.
“The trend is very clear and European football has realised that it must be addressed and reversed.”
David Davies, executive director of the English FA, said: “We recognise the strength of feeling in Europe on this issue but there is some significant opposition from our own Premier League clubs and from some of the bigger Italian clubs.
“We understand the motives, we know why this has to happen, but there will be more talking before any decision is made in Tallinn.”