A local authority is to terminate the contract of any firm found to be blacklisting construction workers.
Islington council in London has gone further than any other authority by unveiling "decisive action" in the wake of continued controversy over secret lists of workers.
An announcement said firms which want council contracts must show they do not practise blacklisting, while those who have done in the past have to prove they have stopped.
Any contractor caught using a blacklist in the future will have their contracts ended.
Unions are continuing to campaign for justice for thousands of workers whose names were discovered on a blacklist five years ago, drawn up on behalf of a number of construction firms.
Many believe they have been denied work if their name was on the list, often for merely raising health and safety issues on building sites.
Richard Watts, leader of Labour-controlled Islington, is to write to the Government calling for a public inquiry into blacklisting, and will urge other councils to follow Islington's lead.
Andy Hull, Islington council's executive member for finance and performance, said: "Blacklisting is an immoral practice that has unfairly caused huge suffering for many workers and their families.
"We are making a stand against an unfair employment practice that has ruined too many lives and we are challenging the Government to hold a public inquiry into this malpractice, which has been widespread."
Maria Ludkin, legal officer of the GMB union, said: "We welcome this kind of robust governance from local authorities.
"It is the only effective guarantee that blacklisting will be stamped out, and workers who were blacklisted compensated, by companies seeking public sector contracts."
Unite assistant general secretary Gail Cartmail said: "There is a momentum growing to consign blacklisting to the dustbin of history. This latest decision from Labour-controlled Islington council is very welcome. We hope more councils will take note and follow suit."
Islington Council spends £300 million each year on goods and services.