Joint ISAF-Afghan operations will now only be conducted regularly at battalion level.
Joint Australian-Afghan foot patrols will become less common.
It amounts to a much reduced combat role for western troops, and experts say the move will seriously affect the training of Afghan forces.
Correspondent: Michael Edwards
Speakers: Colonel Tom Collins, Senior ISAF spokesman; William Hague, Britain's foreign secretary; Bill Roggio, Afghanistan expert; Major-General Jim Molan, Former Chief of Coalition forces in Iraq .
MICHAEL EDWARDS: Frustration with the growing number of 'green on blue' attacks has prompted NATO (North Atlantic Treaty Organisation) to act.
It has now drastically curbed the level of exposure its troops will have with their Afghan counterparts.
Colonel Tom Collins is a senior ISAF spokesman.
TOM COLLINS: We kind of looked at the situation and determined that, you know, the ISAF forces need to kind of step back a little bit, reduce their footprint.
MICHAEL EDWARDS: ISAF says joint operations will now largely be carried out at a battalion level. This means high level operations where at least several hundred troops are involved. Smaller, more basic operations such as foot patrols will need the approval of regional commanders.
But Colonel Collins says it won't diminish ISAF's role in Afghanistan.
TOM COLLINS: NATO and ISAF are absolutely committed to continuing the training and partnering with the Afghan National Security Forces. We've got a long time left in this mission and we're going to do everything we can to improve their capability.
MICHAEL EDWARDS: The US secretary of defence, Leon Panetta, insists the changes will not delay or derail plans to withdraw by 2014.
And Britain's foreign secretary, William Hague, doesn't even consider it a change of strategy.
WILLIAM HAGUE: No it really isn't. As I say, I think the impact on UK operations of this will be minimal.
MICHAEL EDWARDS: But many analysts are reading it as a signal that the situation is getting out of hand for Western forces.
Bill Roggio is an expert on Afghanistan who edits the respected Long War Journal.
BILL ROGGIO: When you look at what's been occurring in Afghanistan you can't walk away and say that things are going well in Afghanistan. The Taliban still can take to the field. They can still conduct assassinations and suicide attacks. And that's happening as we are drawing down.
And now we're supposed to turn this over to the Afghans, and the Afghans aren't prepared to take over security and we can't work closely with them in order to do so.
MICHAEL EDWARDS: As it's part of ISAF the Australian military's role is also likely change. Three Australian troops are among the 51 Western soldiers killed in green on blue attacks this year. Many hope a potentially reduced role will keep Australian forces out of harms' way.
But retired Major-General Jim Molan, a former chief of coalition forces in Iraq, isn't so sure it will. He spoke to the ABC's 7.30 program.
JIM MOLAN: I think it will be a marginal improvement in what's going to go on. We still face the need to go out and do these operations. These operations are likely still to be approved but the bosses are going to have a greater say in the number and the type of those operations.
So this is not an answer. This is not the answer that everyone's been looking for. This is just one other thing amongst many - one thing amongst many other things.
MICHAEL EDWARDS: The Australian Defence Force has yet to put out a detailed response to the ISAF announcement.