The 99p rentals include Blu-Ray discs and will also be available via Blockbuster’s multichannel click and collect service and iPhone app.
It will also offer week-long rentals for games for £5.
Blockbuster claims the “radical and robust overhaul” makes it cheaper than any rival rental service and “means the very best in home entertainment is available at an unbeatable price and long before it is available elsewhere”.
US video streaming firm Netflix announced last week that it will launch in the UK next year.
Blockbuster UK reported a £1.7m profit in the year to last January 2010 a 60% fall from the previous year. Sales also fell 12% to £231m.
Blockbuster’s US operation was recently bought out of bankruptcy in the US by pay-TV operator Dish Network. It can also no longer stock Warner Brothers films after refusing to allow 28 days between when films go on sale and are available for rental.