The nation's drug enforcement agency will take the lead but police must maintain "visibility" as a deterrent against traffickers and users, according to a presidential order released by his office.
Police have reported killing 3,850 people in anti-drug operations since Duterte took office in the middle of last year. He stormed to an election victory after promising 100,000 people would die as he eradicated illegal drugs in society.
Many Filipinos continue to support the crackdown but a survey last month showed the first major drop in Duterte's popularity, which followed rare street protests that were triggered by police allegedly murdering two teenagers.
PDEA has fewer than 2,000 officers while the Philippine National Police has more than 165,000.
Duterte in January made a similar move to give the appearance of sidelining the police, describing the force then as "corrupt to the core" and giving PDEA the lead role in the drug war.
This was in response to revelations officers kidnapped a South Korean businessman under the guise of a drug raid, then murdered him inside national police headquarters.
One critic of the drug war, congressman Gary Alejano, said he doubted Duterte's latest order would stop the killings.
"With the mindset of the president, nothing significant will actually happen with this kind of pronouncement," Alejano told AFP.
"It's possible this was done mainly to clean up the reputation of the police but in reality they will be operating behind the PDEA."
Duterte has as president said he would be "happy to slaughter" three million drug addicts, and repeatedly vowed that police would not go to jail for killing in his drug war.
Today, relatives of two people killed by police filed a case in the Supreme Court calling for the drug war to be declared illegal, likening events in the Philippines to the Holocaust in Nazi Germany.
The drug campaign has also led to wider violence in which thousands of people have been murdered in unexplained circumstances.
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