The State Claims Agency is to cap legal fees for barristers at 25% below their current levels in an attempt to cut costs.
Barristers will also have to tender for work from the agency, which handles personal injury and other compensation claims against State authorities.
The agency reduced the cost of fees it paid to solicitors by 25% last year.
A SCA spokesman said it was one of the biggest purchasers of legal services in the country and it planned to use its buying power to get better value for the taxpayer.
The agency handles claims against 54 State authorities and last year it received almost 2,700 new claims and resolved over 1,600.
It said it had made savings of €81m (24%) in respect of managing claims under the Clinical Indemnity Scheme for the Health Service Executive.
The Government is also setting-up a new legal costs unit within the SCA to deal with third-party legal costs arising from the Mahon and Moriarty tribunals.
It is intended that this unit will also assess legal costs concerning all litigation against the State.