The rules coincide with the introduction of a new system, which lets patients choose any hospital in England for non-emergency surgery -- effectively creating a system whereby hospitals compete against each other.
Under the new advertising code, hospitals will be able to promote their best-performing areas, such as low rates of MRSA, in press and radio ads. But the code prohibits them from using misleading comparisons or discrediting other hospitals.
Testimonials can be used in the ad campaigns, provided the patients are not paid for giving them. The application of the code will be overseen by the Advertising Standards Authority.
The Department of Health has warned hospitals that they need to be aware of the potential effect of over-spending on promotional activity.
The code does not impose a limit on how much money a hospital can spend on advertising, but adspend must be accounted for in its annual report.
"The cost of TV or cinema promotion is very unlikely to be justifiable," the code says.
Under the new rules, hospitals will be allowed to enter into sponsorship deals with a private company, provided the firm is unconnected with the service being sponsored.
For example, an NHS sexual health clinic could not be sponsored by a condom manufacturer, and a fitness company would be banned from sponsoring an NHS fitness club.
Sponsorship is also banned from companies selling products which "are damaging to health or associated with gambling, alcohol, tobacco, weight control or politics", the code says.
The Department of Health will itself spend £500,000 on press advertising and a further £90,000 on radio to promote the new hospital choice regime, which comes into effect on April 1.