Other executives have also agreed to reduce their pay and forgo bonuses.
GM is also halving its annual investor dividend - the first cut in 13 years - which will save it $565m (£323m).
The company has been struggling to handle huge healthcare and pension costs and recently announced 30,000 job losses and nine plant closures in the US.
Wagoner, who was paid a basic salary of $2.2m in 2004, will see his salary halved while four other directors are also taking big pay cuts.
Executive directors will receive no bonuses for the 2005 financial year and the firm's non-executive directors will not be paid a salary in future.