The City of Nottingham Teacher Supply Agency aims to provide a better deal to teachers on its books than equivalent private companies currently offer.
The council has promised to pay them nationally agreed rates on pay and commensurate conditions, and not charge commission.
The move comes as supply teachers from private agencies are in high demand, with councils facing fierce competition for their services. Nottingham hopes its agency will be a more attractive option.
A spokeswoman said: 'We are operating under the national pay and conditions, so we are not creaming off fees. There may be a very small administration charge, but eventually we hope the agency will be self-financing - we are not aiming to make a profit.
'It's nice for teachers to know they are not having part of their salaries creamed off, so a lot of people have responded very positively to the idea.'
Another advantage of the council having its own agency is the potential for quality control.
'If a school complained about a teacher it supplied and the complaint was found to be justified, the teacher would be 'weeded out' and not sent to any other schools,' said the spokeswoman, emphasising that most private supply agencies do not have this function.
As teacher shortages show no sign of abating, the initiative looks set to catch on. North East Lincolnshire Council set up a similar scheme - the North East Lincolnshire Supply Teacher Agency Register. The scheme has been operational since April last year and currently has 280 teachers on its books.
Other education departments have taken a keen interest. The agency has achieved an 88% success rate in supplying schools with the teachers they requested. But private teacher supply agencies are sceptical.
TimePlan's managing director Tish Seabourne said: 'I am very dubious about education authorities being able to organise this kind of thing themselves, it seems like a backward step to me.'