From September heads will receive confidential reports dividing each teacher's lessons into three groups: very good, satisfactory or unsatisfactory.
They will then use the information along with their own evidence about individual teachers to decide what action to take.
At present only the best and worst teachers are reported to headteachers but Chris Woodhead, the Chief Inspector of Schools, believes the arrangements make inspectors reluctant to identify poor teachers.
Despite Mr Woodhead's estimate that there are 15,000 bad teachers, inspectors found only 88 poor or very poor ones in 2,000 inspections last year. The findings were based on a seven-point grading system for lessons.
The Office for Standards in Education (Ofsted), which Mr Woodhead heads, says the new proposals will not necessarily mean that more teachers are dismissed but heads will have a clearer picture of teachers' strengths and weaknesses. Unsatisfactory as well as poor and very poor teachers will now appear in the bottom group.
Heads will also have more discretion in deciding who are the worst teachers. Inspectors currently report teachers to the head if the majority of lessons seen are poor. However, a spokesman for Ofsted said: "We are not saying that these teachers should go. We are simply giving the heads the inspectors' observations to use as additional management information." One bad lesson would not be grounds for action, he said, but it would be seen as part of evidence about a teacher's performance collected by the head.
Both headteachers and teachers had asked for more detailed information about individual teachers' performance, he added. Teachers would see their own profiles.
Mr Woodhead told BBC Radio 4's Today programme: "If teachers are not doing the job they are paid to do, they shouldn't be in post," he said. Equally, more teachers doing a brilliant job would get recognition.
The seven-point grading system for lessons would stay.
Nigel de Gruchy, General Secretary of the National Association of Schoolmasters Union of Women Teachers, said headteachers were to blame for failing to discipline incompetent teachers. "Because heads have been unable or unwilling to act on the information they have, it is most unfair to make teachers pay the price by imposing a very crude and quite unprofessional system on them."
Heads said that they had no objections in principle to the plans but were concerned that the new system might be used to manipulate statistics on poor teachers to justify Mr Woodhead's assertion that there were 15,000 incompetent teachers.
David Hart, General Secretary of the National Association of Head Teachers said: "To pretend that these Ofsted reports will lead to heads taking more disciplinary action is scaremongering. Heads already monitor the quality of teaching. Any head who failed to take action would be asking for trouble."
Stephen Byers, the school standards minister, said that the plans were "entirely in line with the education White Paper published last week. It is all about being accountable and measuring effectively standards in schools".