Publishers have complained that, in some instances, council newspapers are being run as rivals to local newspapers, taking away advertising revenue in the process.
Secretary of state for communities and local government Eric Pickles will put forward proposals to curb council titles, launching a consultation on a revised Code of Recommended Practice on Local Authority Publicity.
The proposals set out specific rules to stop municipal newspapers being published more than four times a year, with resources being redirected to "protect frontline services".
Pickles, said: "An independent local press is an essential part of our open democracy helping local people scrutinise and hold elected councillors to account.
"The rules around council publicity have been too weak for too long allowing public money to be spent on wasteful town hall papers that have left many local newspapers looking over the abyss.
"The proposals I am publishing today will close off these inappropriate practices and encourage councils to focus taxpayers' money on where it should be spent - protecting frontline services."
The consultation specifically states that councils should not publish newspapers in direct competition to local press, should not appear more than quarterly and should only include material directly related to council services.
The consultation is available to view here and is open until 10 November 2010.