A maximum charge of £50 a week is being introduced for people in Wales receiving council home care services.
Councils will be compensated for loss of income under a £10.1m assembly government scheme which aims to end a "postcode lottery" in the amount paid.
But there have been warnings the move could place councils under even greater financial pressure.
The assembly government said it was a landmark move which would make a real difference to many people's lives.
Deputy social services minister, Gwenda Thomas, said research showed "wide inconsistencies" in home care charges from an upper limit of £16.20 per week in Rhondda Cynon Taf to £200 in Neath Port Talbot, and no upper limit in some authorities.
"I am delighted to have been able to introduce these landmark measures which will make a real difference to the people who rely on these vital services the most," she said.
"These individuals represent some of the most vulnerable members of our society who, without such services, would have a poorer quality of life, with many being unable to live independently in the community.
"We are committed to doing all that we can to eradicate inequality wherever it exists - and abolishing the postcode lottery that currently exists within the social care sector is an important step forward in achieving that important aim."
The package also includes an end to charges for transport to day centres, and more scope for people to choose the provider and nature of their care services.
More than 66,000 older and disabled people in Wales currently receive some form of community care allowing them to stay in their own homes, of whom 14,000 have to pay.
The minister claimed people on maximum charges could save between £2,000 and £7,000 a year depending where they were based.
Local authorities will still be able to set the charges they consider reasonable subject to certain limitations, or not charge at all.
The Welsh Local Government Association (WLGA), the body which represents councils, welcomed the attempt to tackle inconsistent charges and to compensate councils, but warned that home care was only part of the picture.
Beverlea Frowen, WLGA director of social services, said: "All elements of councils' social care budgets are currently under intense pressure, including mental health, children with disabilities, children in care and learning disabilities.
"Local authority charges vary due to differences in local circumstances and specific local pressures."
She added that the compensation fund would only cover the costs of people already within the system.
"It does not cover unmet need," she said. "Should more people enter the system, coupled with the financial pressures facing local authorities from severe budget cuts, then local authorities will not be able to meet this new demand and the quality of care could suffer as a consequence."
The cap comes into effect from 11 April.