The approval of shale gas fracking from Energy and Climate Change Secretary Edward Davey comes approximately a year and a half after UK authorities halted the unconventional exploration process after it set off earth tremors at one site.
Shale reserves have been viewed as a way to counter the UK's fall in natural gas production.
Europe's largest gas consumer, Britain in May 2011 put a temporary stop to hydraulic fracturing or "fracking" for shale gas after earth tremors were measured near the site close to Blackpool.
Davey said in a ministerial statement: "I am in principle prepared to consent to new fracking proposals for shale gas, where all other necessary permissions and consents are in place."
Fracking can resume immediately, but explorers need to operate under tighter rules including more thorough assessments for seismic risk and installing a so-called traffic light system where operations will be automatically stopped in certain conditions.
Currently only shale gas firm Cuadrilla Resources has an exploration licence for shale gas in Britain and the company said its fracking work would not resume before March due to the requirement for new permits.
"I think with this announcement that there are other companies who will apply for exploration licences," Simon Toole, DECC's head of licensing, exploration and development, said.
Approval to resume shale gas exploration had been widely expected before the end of the year as Davey said in October that he hoped to lift the ban.
The government announced this month that it would create a dedicated government office to simplify regulation and to offer tax breaks to the shale gas industry.
Britain's domestic natural gas reserves are dwindling, and national production has been dropping since 2004, turning the country from a net exporter into an importer of natural gas.
The British Geological Survey estimates Britain's onshore shale reserves at 150 billion cubic metres, which would be enough to meet Britain's gas consumption for one and a half years, although UK shale gas exploration companies such as Cuadrilla Resources have put their figures as high as 200 trillion cubic feet.
The government has said gas will play an important role in Britain's future electricity mix, with gas-fired power plants expected to fill gaps left by volatile renewable production and the phasing out of ageing coal plants.
Around 21 gigawatts (GW) of current power plant capacity will be phased out by 2030 due to age and stricter pollution rules.
The government has said 26 GW - equivalent to around 25 power stations - of new gas-fired power plant capacity is needed to fill the gap and meet future demand.
In the United States, an oversupply of natural gas following the start of shale gas fracking has brought a drop in domestic power and gas prices.
Partly due to shale reserves, the United States is expected to become almost self-sufficient in oil and gas by 2035 and will overtake Russia in gas production by 2015 and Saudi Arabia in oil production by 2017, the International Energy Agency said in November.
Europe has taken a far more cautious approach partly because of environmental risks and the fact the region is more densely populated than North America, with countries such as France and Bulgaria banning exploration.
The European Parliament rejected a ban on shale gas on November 21 and asked for a robust regulatory regime to address environmental concerns.
The European Commission is expected to come up with a framework for managing risks next year.