The UK’s mobile providers are being banned from buying new Huawei 5G equipment after 31 December, and they must also remove all the Chinese firm’s 5G kit from their networks by 2027.
Digital Secretary Oliver Dowden told the House of Commons of the decision.
It follows sanctions imposed by Washington, which claims the firm poses a national security threat – something Huawei denies.
Mr Dowden said the move would delay the country’s 5G rollout by a year.
He added that the cumulative cost of this, and earlier restrictions announced against Huawei earlier in the year, would be up to £2bn.
“This has not been an easy decision, but it is the right one for the UK telecoms networks, for our national security and our economy, both now and indeed in the long run,” he said.
Because the US sanctions only affect future equipment, the government has been advised there is no security justification for removing 2G, 3G and 4G equipment supplied by Huawei.
However, when swapping out the company’s masts, networks are likely to switch to a different vendor to provide the earlier-generation services.
Huawei said the move was: “Bad news for anyone in the UK with a mobile phone” and threatened to “move Britain into the digital slow lane, push up bills and deepen the digital divide.”
New restrictions are also being applied to use of the company’s broadband kit.
The government has also been advised operators should “transition away” from purchasing new Huawei equipment for use in the full-fibre network, ideally within the next two years.
Mr Dowden said the government would “embark on a short technical consultation” with operators about this.
He explained that the UK needed to avoid becoming dependent on Nokia as the single supplier of some equipment, and he wanted to avoid “unnecessary delays” to the government’s gigabit-for-all by 2025 pledge.
The action, however, does not affect Huawei’s ability to sell its smartphones to consumers or how they will run.