The Medical (Professional Performance) Bill will allow the council to investigate cases where a doctor's standard of professional performance is alleged to be "seriously deficient".
The GMC will be able to impose conditions on a doctor's continuing practice, such as retraining and working under supervision, or to suspend doctors indefinitely where they refuse to comply or fail to improve their performance.
The change, which will take effect in 1997, provides this additional procedure, separate from "serious professional misconduct", the cases where doctors are struck off after, for example, perpetrating fraud, having affairs with patients or breaching their terms of service by failing to visit.
Finlay Scott, the GMC's chief executive, said the system, which will operate in private, could cover cases such as the recent string of pathologists who misdiagnosed cervical and bone cancers - those where doctors "genuinely believe the results are right, but are not identifying them correctly".
The procedure, which requires poor performance to be "serious", would not cover occasional incidents of rudeness but could include "persistently inappropriate" behaviour and cases where doctors "are incompetently doing their best but not doing the job properly," the GMC said yesterday.
Although the council can deal with sick doctors through a health committee, it has been unable to tackle poor performance, as the only charge it can bring is serious professional misconduct.
Mr Scott estimated that perhaps 100 to 150 doctors a year might be investigated, but only 50 or so would face sanctions. Retraining will be paid for by NHS trusts, but GPs as self-employed contractors would have to pay for any retraining themselves, Gerald Malone, the Minister of Health, said.
At a press conference in which he failed to mention patients once, Mr Malone said the new procedures were not designed to be "Draconian against doctors". They did, however, provide a framework that would allow the GMC to act "quickly and effectively". Patients, doctors' colleagues and NHS managers will all be able to refer cases to the new procedure.
Labour will facilitate the Bill's passage on the grounds that it is not perfect but the Government only agreed to introduce it with cross-party support.
However, the measure was vigorously attacked yesterday by Jean Robinson, a vice-president of the Patient's Association who was a member of the GMC for 14 years.
Ms Robinson said that it would involve only cases judged on poorly defined criteria to be "serious", would operate entirely in private and would provide none of the rights to be represented or to seek judicial review which are enjoyed by patients bringing complaints of misconduct.
At an early stage, the GMC would decide whether the complaint was a "performance" or "misconduct" issue, sending it down one track or the other when many complaints involved both. "I am very unhappy about this," she said.
Professor Margaret Stacey, a former council member and author of a recent eight-year study on the GMC, said that the planned procedure was both cumbersome and opaque and the GMC had laboured to produce "not a mouse but some sort of misdirected monster".
She feared that MPs and the public would believe the new procedure would deal effectively with incompetent doctors when "I don't think that is really going to happen".
It was good that the GMC was addressing the issue, she said, "but I am sorry that it hasn't recognised that seriously incompetent practice is in fact serious professional misconduct". She added: "That does not mean it could not be dealt with by a series of measures, depending on the case, which could include retraining."
The British Medical Association backed the proposed legislation, declaring that it was "an overdue measure to ensure that the professionalism of doctors is maintained at the highest level at all times".
The association welcomed its containing "remedial" rather than "disciplinary" measures and said it would have "the overwhelming support" of the medical profession.
The GMC has been pressing the Government to introduce the Bill since 1992, but it still lacks some extra powers the GMC would like, including the right to put conditions on a doctor's activities when he or she is restored to the register after being struck off.