TransPennine Express will be nationalised after customer complaints of poor service and cancelled trains.
The government will now run the service which covers Manchester and Liverpool in the North of England and runs to Edinburgh and Glasgow in Scotland.
Passengers will see no change to the service but the overall aim is to improve its performance.
In January and February about a quarter of its services were cancelled.
That improved to around one in six in March, although that was still the highest rate in the UK.
The Department for Transport said that TransPennine's contract would not be renewed on 28 May.
It will now be run by the Operator of Last Resort (OLR), which means a business will step in on behalf of the government to take over the management of the service.
Transport Secretary Mark Harper said commuters and firms no longer had to bear "the brunt of continuous cancellations".
TransPennine, which is run by the company FirstGroup, has stood out for the number of trains it has cancelled the night before they are due to run, because of staff shortages.
There has been ongoing disruption since early 2022, but the company has said a recovery plan was bringing the numbers down.
It has previously blamed high staff sickness rates, a backlog of driver training and the lack of an overtime working agreement with the drivers' union Aslef.
Mr Harper said taking TransPennine under state control was "not a silver bullet and will not instantaneously fix a number of challenges being faced".
He blamed strikes by Aslef for hampering a full service being offered on TransPennine routes.
However, Aslef said that was "misleading" and that the blame should lie with the company's "inept management".
FirstGroup said it was disappointed by the government's decision not to renew the contract it has run in various guises since 2004.
"Our team have worked extremely hard to improve services, including by recruiting and training more drivers than ever before," said Graham Sutherland, FirstGroup's chief executive.
He added that private rail operators still have an "important role" in delivering rail services.
West Yorkshire Mayor Tracy Brabin said there had been "a catalogue of failure and delays and cancellations" on TransPennine and that it was "absolutely right that this is the end of the line" for the "failing railway operator".
She said the cancellations were "damaging our economy" and that this was "an opportunity to reset relationships" between unions and the new management.
One of the reasons for the cancellations is that train drivers don't want to come to a "rest day working arrangement" - unions have said they're not paid enough to do that.
Ms Brabin said that industrial relations between the train operator and staff, including drivers, were "at absolute rock bottom" in part due to funding constraints, and that the government needs to "get round the table".
Passengers on the packed Manchester to York line on Thursday morning weren't surprised by the news.
"I've been getting this train for 20 years and it's been a bit fraught," said Chris Flanagan.
A few years ago there was some investment, but since the Covid pandemic "it's been absolutely horrendous", he said.
"Most days you can't actually get into the office. [It's been] pretty grim," he added.
Fellow commuter Sarah Hunt agreed, saying she checks what trains are running both the night before and in the morning before setting off.
But the the service being nationalised "could be a good thing", she said.
"I feel like Northern did benefit a lot from when it was taken over by the Operator of Last Resort, so I do think that possibly, it could be quite useful."
Northern, London and North Eastern Railway (LNER) and Southeastern Trains are also run by the OLR.
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