The Labour initiative has so far cost the NHS £6.4bn.
The government's announcement follows the publication of a new report by the Cabinet Office’s Major Projects Authority (MPA).
The MPA, set up in May of this year, reported that the National Programme for IT has not and cannot deliver to its original intent.
The report concluded that ‘there can be no confidence that the programme has delivered or can be delivered as originally conceived.’
Ministers have agreed to an accelerated dismantling, accompanied by new measures to allow NHS trusts to make more IT decisions, and procure services at a local level without losing the ability to share information and systems where necessary.
Health secretary Andrew Lansley will set out the plans in full this November.
Mr Lansley said: ‘Labour’s NHS IT Programme let down the NHS and wasted taxpayers' money by imposing a top-down IT system on the local NHS, which didn’t fit their needs.
‘We will be moving to an innovative new system driven by local decision-making. This is the only way to make sure we get value for money from IT systems that better meet the needs of a modernised NHS.’
A spokeswoman from the DoH said that existing IT services used by GPs, such as the summary care record, choose and book and the electronic prescription service would not be affected by the changes.
‘We’re not pulling the plug on things that have become part of every day business,’ she said.