PM Boris Johnson has commissioned a review into the 2m social distancing rule, the chancellor has confirmed.
Mr Johnson said there was "margin for manoeuvre" in the 2m rule as the number of coronavirus cases falls.
Rishi Sunak told the BBC the government would "actively" look again at the measure, given its "enormous impact" on the profitability of businesses.
It is understood the review will aim to report back by 4 July, when pubs and restaurants could open in England.
Mr Johnson said: "As we get the numbers down, so it becomes one in 1,000, one in 1,600, maybe even fewer, your chances of being two metres, or one metre, or even a foot away from somebody who has the virus is obviously going down statistically, so you start to build some more margin for manoeuvre."
The chancellor added he would like to see the rule relaxed, if "safe and responsible" to do so.
Ex-Tory leader Sir Iain Duncan Smith said the evidence "already shows that it is wholly feasible to move to 1m".
"If other countries are doing it successfully, we need to move now," he added.
The review, which was first reported in the Mail on Sunday, will take evidence from scientists as well as economists, Mr Sunak confirmed.
Speaking on the BBC's Andrew Marr programme, Mr Sunak said "many other countries" had a rule less than 2m and the review would "look at the issue in the round".
"Much as I would like to see it reduced - everyone would like to see that reduced from an economic perspective - we can only do that if it's safe and responsible to do so," he said.
He added that scientists had made clear there is a "different degree of risk at different levels," and the decision on relaxing it is "ultimately" for ministers to make.
The UK government currently advises people to stay 2m (6ft 6in) apart from others to avoid spreading coronavirus.
This is further than the World Health Organization's recommendation of at least 1m (just over 3ft), and some other countries like France and Denmark. But the UK government's scientific advisers say that being 1m apart carries up to 10 times the risk of being 2m apart.
Some bars, restaurants and pubs say they will be unable to make a profit if the 2m guidance is still in place when they reopen. Tourism firms have also warned of tens of thousands of job losses unless the distance is shortened.
Kate Nicholls, chief executive of the industry body UK Hospitality, says that with a 2m rule, outlets would be only able to make about 30% of normal revenues, whereas 1m would increase that to 60-75%.
Richard Caring, chairman of Caprice Holdings which runs the Ivy, told the Mail on Sunday the government was "killing the country".
"There are estimates saying we could have up to five million unemployed," he said. "It's not going to be five million - it's going to be more. I don't think we've seen anything yet."
Mr Johnson is also under pressure from some of his own MPs to reduce the 2m rule over concerns it would made it difficult for firms to turn a profit after they reopen.
Sir Iain said the review should be "swift," and called on the prime minister to reduce the rule now "for the good of the economy".
"Whether there is a review or not, it will come down to a political judgment for the prime minister to make," he added.
Shadow justice secretary David Lammy said Labour would support a relaxation of the 2m rule if the evidence showed it was "the right time to do it".
Also speaking on the Andrew Marr programme, he said the government should "follow the science," and be "frank and honest with the public on balancing risk".
He added: "I think the government's been slow, slow on testing, slow on lockdown, slow on PPE [personal protective equipment], and I suspect they'll be slow again on this".
The 2m distance has been implemented by all nations of the UK, which have their own powers over restrictions. But so far, political leaders have rejected calls to relax the 2m rule.
Earlier this week, Scotland's chief medical officer Dr Gregor Smith said the evidence was "incontrovertible" that the risk of transmitting the virus increased the closer you got to someone.
He said it was a "balanced and sensible precaution" to ensure transmission is reduced.
And Northern Ireland's First Minister Arlene Foster said the medical advice suggested 2m apart was the "safest place to be".
While pubs, bars and restaurants could open in England from 4 July, no date has been given in Scotland, Wales or NI.
From Monday, all non-essential shops in England will be allowed to reopen - as long as they enforce the 2m guidance among shoppers and staff.
In Northern Ireland, all shops were allowed to open from Friday. No dates have been set for the reopening of non-essential shops in Scotland and Wales, although each country has set out its planned stages for lifting lockdown.
The UK government has repeatedly said it is constantly reviewing its coronavirus lockdown guidance.