Health secretary Andrew Lansley has ordered a full public inquiry into the unnecessary deaths of up to 1,200 people at Mid-Staffordshire NHS Foundation Trust.
The inquiry will take place under the Inquiries Act 2005, a key demand of campaigners. It means witnesses will be compelled to attend and give evidence under oath.
Substandard care is estimated to have caused the avoidable deaths which occurred between 2005 and 2008.
A Care Quality Commission report blamed "systemic problems" at the trust. The Healthcare Commission said some were "dying needlessly" and suggested at least 400 more people had died there than should be expected.
"We know only too well what happened at this hospital - what we need to know is how and why," Mr Lansley said.
"A full public inquiry will shed light on uninvestigated areas and help us to understand and learn from them."
Reports emerged from Stafford hospital of unqualified receptionists assessing patients as they arrived at A&E and heart monitors being turned off because nurses did not know how to use them.
Some patients were said to have resorted to drinking out of vases because they were so dehydrated.
Campaign group Cure The NHS had been calling for a public inquiry before the 2010 general election. It was unsatisfied by the inquiry, with a limited remit, held under the Labour government.
"The events at Mid-Staffordshire were a tragic story of targets being put before clinical judgement and patient care, focusing on the cost and volume of treatment not the quality," Mr Lansley added.
"That is why I want to move away from targets and replace them with measuring what matter most to patients - their experience of the NHS, the quality of their care and the outcome of their treatment."
The inquiry will be chaired by Robert Francis and will deliver its final report by March 2011.
Any criticisms are likely to be met with a sympathetic response from the health secretary, who today announced plans to change NHS employees' contracts to enable whistleblowing.
Mr Lansley also plans to scrap targets set under Labour, publish data about healthcare providers' performance and give patients the power to rate hospitals and doctors.
"We need a culture change in the NHS that puts patients first - an NHS that listens to patients and responds to their concerns and needs," he said.
"If patients at Stafford had been listened to and prioritised over processes and targets these terrible failings would have been challenged sooner."