The designated player rule, also known as the David Beckham rule, was put in place in 2007 to allow each club to pay one player any amount above a fixed salary budget charge. The club's salary budgets are an expense shared by all MLS owners.
Teams will now be allowed two designated player spots and can purchase a third slot for $250,000.
Each designated player will count $335,000 toward the team's salary cap or about 13 percent of a club's salary budget.
"Expanding the designated player rule is another example of MLS's commitment to providing top-level soccer for our fans," Todd Durbin, MLS vice-president of player relations and competition, said in a statement.
"After three seasons, we have seen that the designated player rule improves the quality of play, creates intrigue and discussion, and enhances our clubs' distinct on-field identities.
"We will continue to see varied approaches from our clubs in assembling their rosters, and these changes will give them increased flexibility."
It was the designated player rule that enabled the Los Angeles Galaxy to lure former England captain David Beckham to the United States with in a multi-million dollar deal.
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