Stop and search powers are to be overhauled amid concerns that the controversial practice could have been used illegally one in four times last year.
Home Secretary Theresa May stopped short of introducing fresh legislation - but warned that she would change the law if the use of stop and search did not come down.
As well as bringing in a new code of practice, Mrs May told the House of Commons that individual officers will be stripped of their right to use the powers if they fail a new assessment.
Shadow home secretary Yvette Cooper accused Prime Minister David Cameron of watering down Mrs May's reforms.
Changes are being brought in after Her Majesty's Inspectorate of Constabulary (HMIC) found that 27% of stop and searches did not contain reasonable grounds for suspicion, meaning more than 250,000 of the one million searches conducted last year could have been illegal.
In addition, black and minority ethnic (BME) members of the public are up to six times more likely to be searched than white people.
The Home Secretary admitted that the only reason for a large number of stop and searches is that the person being searched is black.
Describing it as "absolutely disgraceful", she said it had become a way of life for young people in black and ethnic minority communities and must be changed.
Mrs May said: "It is very clear that in a large number of cases the reasonable grounds for suspicion were not there and one can only therefore assume, given that black people are six times more likely to be stopped and searched than a white person, that it is precisely the fact that they are a black person that has led to that stop and search taking place."
The Home Secretary told the House she had "long been concerned about the use of stop and search".
"While it is undoubtedly an important police power, when it is misused stop and search can be counter-productive," she said.
"First, it can be an enormous waste of police time. Second, when innocent people are stopped and searched for no good reason, it is hugely damaging to the relationship between the police and the public. In those circumstances it is an unacceptable affront to justice."
Mrs May commissioned HMIC to inspect every force in England and Wales to see how stop and search powers are used and last year launched a consultation into the method.
However, reforms to stop and search were reportedly disrupted earlier this year as reports emerged that Mr Cameron blocked plans to curb use of the powers to prevent a view being taken that the Conservatives were too soft on crime.
The Home Secretary announced plans to revise the Police and Criminal Evidence Act Code of Practice A, which outlines what constitutes "reasonable grounds for suspicion".
"The revised code will emphasise that where officers are not using their powers properly they will be subject to formal performance or disciplinary proceedings," Mrs May said.
" I have told them that if they do not do so, the Government will bring forward legislation to make this a statutory requirement."
The Home Secretary told the House of Commons she had commissioned Alex Marshall, chief executive of the professional standards body College of Policing, to review stop and search training.
As part of the review, the college has been asked to introduce an assessment of officers' fitness to use stop and search powers.
In addition, a new scheme, dubbed Best Use of Stop and Search, will include a requirement for forces to introduce a stop and search complaints "community trigger", in which the police must explain to the public how stop and search powers are being used where there is a large volume of complaints.
Mrs May said changes should lead to a significant drop in overall use of stop and search and improved stop-to-arrest ratios.
She added: "But I want to make myself absolutely clear: if the numbers do not come down, if stop and search does not become more targeted, if those stop-to-arrest ratios do not improve considerably, the Government will return with primary legislation to make these things happen."
"Nobody wins when stop and search is misapplied. It is a waste of police time. It is unfair, especially to young black men. It is bad for public confidence in the police."
Ms Cooper said Mrs May had called for statutory guidance on race discrimination and had written to No 10 asking to change the law so that stop and searches could only be carried out to prevent serious violence.
The Labour MP accused the Prime Minister of ignoring ethnic minority communities and the advice of his own Home Secretary.
She said to Mrs May : " You wrote to the Prime Minister in December saying that you wanted to change the law on Section 60 stop and searches so that the test for the powers used is necessary and expedient.
"Well, we agreed, but instead all you are doing is a voluntary scheme."
The Home Secretary replied that she had written to Chief Constables asking them to abolish "unacceptable" targets and said there was no need to change the law on Section 60 as case law effectively does mean the rules have been changed so stop and searches can only be used to prevent serious violence.
Rachel Robinson, policy director for human rights campaign group Liberty, said: " For too long governments have talked tough on racism but maintained stop and search without suspicion - a power steeped in discrimination.
"The Home Secretary's intervention continues the trend - a half-hearted mix of voluntary, patchy measures while telling police to follow current codes of practice is no fix.
"Public trust is wearing thin and today was a missed chance for real change."