Football League clubs today voted to close the loophole that saw Watford have 14 players on loan last season - including 10 from Italian side Udinese.
The 72 clubs meeting in Vilamoura, Portugal, voted "unanimously" to change the rules so overseas loans are treated in the same way as domestic loans.
It means clubs will be restricted so that 18-man match-day squads to five loan players, with a maximum of four from any one club over the whole season.
A Football League spokesman confirmed to Press Association Sport: "The proposal was voted for unanimously."
Clubs also voted to cap sell-on fees for players at 50%. It follows an unsuccessful attempt by one club last season to secure a 75% sell-on clause - where the club would get three-quarters of any sell-on fee - which raised concerns about possible third-party influence.
In relation to the loan player changes, Watford's use of the system led to a number of complaints and the league appointed its working party on player-related issue to look into the matter and come up with the proposal to close the loophole.
The Pozzo family who Watford also own the Serie A club Udinese, while other players have come from another club owned by the family, Granada in Spain.
Watford's loan players included the Championship player of the season Matej Vydra, the Czech striker.
The Hornets found themselves publicly criticised by Crystal Palace manager Ian Holloway in February after naming seven loan players against his team.
Holloway, who called the overseas loophole "ludicrous", had the last laugh after his side beat Watford in the Championship play-off final to win a place in the Premier League.