The decision by the England and Wales Cricket Board (ECB) was agreed unanimously at a meeting on Tuesday at Lord's, the organisation said in a statement on Wednesday.
From 2003 counties have been able to field two overseas players, but a consultation led by ECB deputy chief executive Hugh Morris showed that an "overwhelming number" of counties want to revert to one, the ECB said.
"Counties reported that it has become increasingly difficult to attract a second overseas player for a full season, overseas boards were recalling players at more frequent intervals and that counties wished to provide more opportunities for talented players qualified for England," it said.
From 2008 counties will be able to register just one overseas player, who can be replaced if they are injured, called up for an overseas tour at short notice or required to return home.
A maximum number of four overseas players can be registered in one season.