The deal between GP leaders and NHS England will remove 341 QOF points, 38% of those available, worth up to £54,000 to the average practice.
From this, funding worth up to £16,000 per practice will pass to a new enhanced service that seeks to prevent inappropriate hospital admissions through a battery of new responsibilities for GPs.
GPs welcomed the move to shrink the impact of QOF and remove the burden of red tape that had begun to 'take priority over patients' needs'.
The deal, announced on Friday, scraps many of the indicators imposed on GPs after negotiations over the 2013/14 contract broke down last autumn, according to the GPC.
It will see 24 clinical indicators retired, including the much-maligned targets to assess hypertensive patients with the General Practice Physical Activity Questionnaire (GPPAQ). A further six indicators will be retired from the public health domain, as well as the patient experience indicator, PE001.
Instead, 238 points worth nearly £37,000 of average practice income will be reinvested in the global sum.
A further 100 points released by scrapping the quality and productivity indicators will fund a new, one-year enhanced service that aims to reduce unplanned hospital admissions.
The comprehensive service will require named, accountable GPs to case-manage vulnerable patients using personalised care plans.
Practices that sign up will also need to improve access to consultations for these patients, as well as provide telephone access for relevant providers to support decisions about hospital admissions or transfers.
Internal reviews of unplanned admissions and the local discharge process must also be undertaken.
Three points released from QOF will be used to bolster the learning disabilities enhanced service.
Threshold changes 'delayed'
Government plans to ramp up thresholds in a raft of targets will be delayed until 2015. The DH imposed higher thresholds on 20 indicators in 2013/14 and had intended to extend this to more indicators the following year, but this will now be deferred until 2015/16.
The existing patient participation, extended hours access scheme, dementia, alcohol and learning disabilities DESs will all be extended for a further year.
But the patient online and remote care monitoring enhanced services have been scrapped and funding passed into core pay.
GPC chairman Dr Chaand Nagpaul said: 'Our agreement will deliver real benefit to patients and build on the work already carried out by GPs.
'Most importantly, the government has listened to the concerns of the BMA and reversed the adverse impact of last year’s contract changes, which resulted in the introduction of unnecessary targets and excessive paperwork, freeing up resources for GPs to use their clinical judgement, not a checklist, when treating their patients.'
RCGP chairwoman Dr Clare Gerada welcomed the QOF overhaul and said it would 'help us to get back to our real job of providing care where it is most needed, rather than more box-ticking'.
She said: 'The QOF has been a successful system for improving patient outcomes in general practice but red tape and misdirected financial incentives are increasingly taking priority over patients' needs.'