Branding the unauthorised erection of flags in a mixed area of south Belfast a "breach of the peace" has been called the most significant move on the issue in years and sparked fresh debate among politicians.
Loyalists have condemned the move while nationalists have urged that it be rolled out everywhere.
The new move means that the erection of loyalist flags in the largely nationalist Ballynafeigh area of the Ormeau Road is an arrestable offence.
The area used to be predominantly Protestant but this has since been reversed, with a 57% Catholic majority.
In response to a rise in tensions as a result of loyalist flag-flying in the area, Sinn Fein MLA Alex Maskey met the police.
Mr Maskey complained that the abundance of flags was bad for the "local economy and very bad for local community relations".
He criticised police for allegedly watching people erecting flags, saying they brought themselves into "disrepute". Mr Maskey also alleged that those putting up the flags were abusive to locals who begged them not to put them up.
A police spokeswoman then confirmed that "any future erection of flags on this part of the Ormeau Road will be treated as a breach of the peace".
The spokeswoman added that community representatives had been "spoken to and advised of this".
"We accept that this can lead to the perception of differing approaches in different areas, but this is the essence of local community resolutions in the absence of a wider consensus," the spokeswoman concluded.
However, it will not be the PSNI's responsibility to take flags down except in "extreme circumstances" where there is a substantial risk to public safety.
Mr Maskey said the move was an "important milestone" and revealed he will continue to meet police to "take the initiative forward".
The SDLP wants this new policy rolled out across Northern Ireland.
Party leader Alasdair McDonnell said people should not be allowed to cause aggravation or disturbance with flags.
Alliance MLA Anna Lo said she was "deeply concerned" by the "proliferation of flags in the area" and that she did not want them used "as a means of intimidation and to mark out territory".
Unionist politicians are less than thrilled with the decision. East Londonderry DUP MP Gregory Campbell described the move as an "unworkable solution" and said police would be swamped with people demanding the policy is implemented elsewhere.
PUP leader Billy Hutchinson called for the authorities to police society "fairly". He added that it should not be a "two-tier system" with one rule for republicans and another for loyalists.
Queen's University academic Dr Dominic Bryan has described the move as the most significant in years but said that it would be difficult to enforce the new policy further afield than south Belfast.
He is working on a four-year study looking at the topic of flags in Northern Ireland commissioned by the Office of the First Minister and Deputy First Minister.