Indoor performances with socially distanced audiences can take place in England from the start of August, the prime minister has said.
The government is working with the sector on pilots of performances with socially distanced audiences in theatres and music venues.
Boris Johnson said the findings would feed into final guidance for venues in the run-up to them reopening.
But the head of Theatres Trust said the move "will not be economically viable".
Although Jon Morgan, director of Theatres Trust welcomed the news as "a step in the right direction", he said that "for most theatres it will not be economically viable to reopen with 30-40% audience required under social distancing".
He said they needed to progress to theatres being allowed to open fully "with the appropriate safety measures", adding: "Without this most theatres cannot reopen viably and we need the go-ahead for Christmas shows, on which the survival of many theatres depends, in the next few weeks at the very latest."
The government stressed that "audiences, performers and venues will be expected to maintain social distancing at all times."
It added: "This guidance will be for organisations in England. Organisations in Scotland, Wales and Northern Ireland should adhere to the advice of the devolved administrations at all times."
Venues have been shut since March as part of the lockdown due to the coronavirus pandemic.
The Department for Digital, Culture, Media and Sport added it was now working with venues including the London Symphony Orchestra on measures for reopening.
However it added that singing and the playing of brass and wind instruments in groups or in front of an audience is "still currently limited to professionals only".
The announcement is likely to be welcomed by theatre owners and producers, but a sense of frustration with the government is likely to remain.
It makes no financial sense for many venues to open with social distancing rules in place; theatre budgets tend to be based on a breakeven of around 70% capacity.
If social distancing measures mean a theatre can only run at 20-25% capacity, the producer cannot afford to put the show on.
What the industry says it desperately needs from the government is some clear guidance on when stage five (fuller audiences indoors) of the phased return will be possible.
The call is for the government to announce a "not before" date, which would allow producers and theatre owners to make a plan of action for the coming months, be that preparing a show or reducing overheads.
The Society of London Theatre, which represents venues in London's West End, said it was "delighted" by what it called "another welcome step on the road map towards reopening with full audiences".
Yet it said it would not be "practical or economically viable" for many shows to open with social distancing restrictions.
"We welcome the news that theatres & performance venues can reopen with social distancing in August, but the reality is the vast majority will not be opening," tweeted actors' union Equity.
Choreographer Sir Matthew Bourne also expressed doubts about theatres' ability to open with social distancing in place.
"Why make these announcements when they know that the vast majority of theatre, dance and music is not financially viable under 'Covid secure' conditions?" he tweeted.
The UK's media and entertainment union Bectu said the news was "a significant development" but that venues would need government support if they are to reopen.
"We know that theatres and venues will not be open in two weeks' time," said its head Philippa Childs. "Theatres will have to bring back productions, sell tickets, conduct rehearsals and prepare for how they will operate in a Covid-secure way before they can open up again.
"This announcement brings into sharp focus the need for urgent answers to the pressing questions that we have been asking since the arts recovery package was announced nearly two weeks ago."
Earlier this month the government announced a £1.57bn support package, following several weeks of lobbying from theatres, music venues, art galleries and other cultural institutions, many of which had said they were on the brink of collapse.
The government has also now outlined measures to "support the safe return of audiences", including:
- Reduced venue capacity and limited ticket sales to ensure social distancing can be maintained
- Tickets should be bought online and venues encouraged to use e-tickets to reduce contact and help with track and trace
- Venues should have clearly communicated social distancing marking in place in areas where queues form and adopt a limited entry approach
- Increased deep cleaning of auditoriums
- Performances should be scheduled to allow sufficient time to undertake deep cleaning before the next audience arrives
- Performers, conductors and musicians must observe social distancing wherever possible
Culture Secretary Oliver Dowden said: "The UK's performing arts sector is renowned across the world and I am pleased that we are making real progress in getting its doors reopened to the public with social distancing."
This latest announcement will now see venues move to stage four of the government's "five-stage roadmap for the return of professional performing arts", which was recently outlined by Mr Dowden as follows:
- Stage One - Rehearsal and training (no audiences and adhering to social distancing guidelines)
- Stage Two - Performances for broadcast and recording purposes (adhering to social distancing guidelines)
- Stage Three - Performances outdoors with an audience plus pilots for indoor performances with a limited distance audience
- Stage Four - Performances allowed indoors/outdoors (but with a limited distanced audience indoors)
- Stage Five - Performances allowed indoors/outdoors (with a fuller audience indoors)
Even as the government was preparing to unveil its latest measures, however, more venues announced they were having to consider staff redundancies.
The Royal Opera House announced on Friday "with huge sadness" that it had made the "difficult decision" to begin "a restructure process".
And in Edinburgh, the Traverse Theatre said it had made the "painfully difficult decision to enter into redundancy consultation" with "a number" of its team.
In a statement, the venue said it was likely that "almost a third" of its staff "in customer-facing and technical roles" would lose their jobs.