The best lecturers will be in line for a £10,000 bonus under the revamped National Teaching Fellows scheme.
The programme will also allow teams of academics to bid for study grants of up to £250,000.
The £50,000 awarded to each fellow for projects in previous rounds will be split. New fellows will win £10,000 each in recognition of their outstanding teaching and student support achievements.
The remaining £40,000 will be pooled to provide funding for large-scale sector-wide projects aimed at improving the student experience.
Teams must include at least one past or present teaching fellow.
The different categories of experienced staff, learning-support staff and rising stars will be abolished.
The revamp will affect the round of awards made in September 2006. The Higher Education Academy, which runs the fellowship scheme, said that the changes will mean that staff can be rewarded for their achievements in teaching without their necessarily having to propose a major project as well.
"There will be no requirement for teaching fellows to do a project," said Paul Ramsden, chief executive of the HEA.
"Essentially, the award will be a recognition of performance and excellence. It's not a prize as such but it could be used towards personal development or to cover travel costs."
The teams will be led by one institution but could include people from several universities, Professor Ramsden said. They will fall under one of four themes identified by the HEA as priorities: academic leadership; quality management; innovation in student support; and student assessment.
Projects will be chosen in a competitive bidding process managed by the HEA.
"We are trying to align the sector-wide projects with various issues identified by stakeholders," Professor Ramsden said.
"(The projects) are highly practical and aimed at improving the quality of the student experience. The original intention of the scheme was to combine award and project.
"It's building on the original philosophy but using that resource more effectively. Fellows were put under a lot of pressure to use the £50,000 for projects without always getting institutional support."
Bob Rotheram, senior learning and teaching adviser at Nottingham Trent University and chairman of the Association of National Teaching Fellows, said: "There's a need to maintain distinctiveness from other awards.
"A great strength of the scheme has been the diversity of fellows. Many of us are teachers first and researchers second. That's healthy and appropriate.
"There will be a need to ensure that most project money doesn't end up with those who get plenty of money (from other schemes)."
Professor Ramsden said: "Both schemes aim to recognise excellence and that occurs where it will occur. We can't legislate for some institutions bidding and being more successful than others. It's a competition and will be a competitive process."