NHS staff and care workers from overseas will no longer have to pay an extra charge towards the health service after mounting pressure from MPs.
Boris Johnson's spokesman said the PM had asked the Home Office and Department for Health to exempt NHS and care workers "as soon as possible".
Labour leader Sir Keir Starmer said it was "a victory for common decency".
The health immigration surcharge on non-EU migrants is £400 per year and set to rise to £624 in October.
The move to grant the exemption came after the PM's spokesman defended the fee earlier on Thursday.
Officials are now working on the detail and more will be announced "in the coming days".
But it is understood the plan will include exemptions for all NHS workers, including porters and cleaners, as well as independent health workers and social care workers.
The chief executive of the Royal College of Nursing, Dame Donna Kinnair, said the charge had created "an unfair and unjust financial burden", adding: "At last the government has agreed with us.
"This will ease the pressure on families who may be struggling financially or emotionally as a result."
Mr Johnson himself stood by the charge on Wednesday, telling MPs he "understood the difficulties faced by our amazing NHS staff", but said the government "must look at the realities" of funding the NHS.
It caused a backlash, with a number of Tory MPs joining opposition MPs in calling for him to reconsider - including the Tory chairman of the Commons public administration select committee, William Wragg, and his backbench colleague Sir Roger Gale.
It all happened pretty quickly.
Just yesterday when the Labour leader Keir Starmer pressed Boris Johnson to change his mind, the prime minister was firm. He was adamant, it was the right thing to stick with the plan.
But overnight, there was disquiet - some chatter among Tory MPs - a few of them breaking cover to say they thought it was the wrong thing to stick with the charge.
And, lo and behold, just after four o'clock this afternoon, Downing Street announced that the prime minister would be thinking carefully.
For the government's critics, of course, it has been portrayed immediately as a screaming U turn.
A way for Downing Street to close down a political row.
But many people who thought it was the wrong thing might be pleased that the prime minister, in their view, has seen sense on this occasion.
Earlier, No 10 defended the levy, saying the money "goes directly back into the NHS to help save lives".
But now Mr Johnson's spokesman has said: "[The PM] has been thinking about this a great deal. He has been a personal beneficiary of carers from abroad and understands the difficulties faced by our amazing NHS staff.
"The purpose of the NHS surcharge is to benefit the NHS, help to care for the sick and save lives. NHS and care workers from abroad who are granted visas are doing this already by the fantastic contribution which they make."
The change was welcomed by Labour, as the party had been planning to seek an amendment to the Immigration Bill to secure the exemption.
Sir Keir tweeted: "Boris Johnson is right to have u-turned and backed our proposal to remove the NHS charge for health professionals and care workers.
"This is a victory for common decency and the right thing to do. We cannot clap our carers one day and then charge them to use our NHS the next."
Mr Wragg also praised the decision, saying the PM had "shown true leadership, listened and reflected".
The leader of the SNP in Westminster, Ian Blackford, said he was "pleased to see the change of heart after pressure", while the acting leader of the Liberal Democrats, Sir Ed Davey, called it "a great cross-party win".
The change was also welcomed by of Joint Council for the Welfare of Immigrants.
But the charity's chief executive Satbir Singh added: "It's depressing that it's taken nearly two months for the government to listen."
The surcharge is currently paid by non-European Economic Area (EEA) nationals coming to the UK for longer than six months.
There are exemptions for victims of slavery or trafficking, children taken into care, and the dependants of armed forces personnel.
The current rate of £400 a year is double what it what it was when first introduced in 2015.
It is due to be extended to EEA citizens moving to the UK from from next January, after the post-Brexit transition period ends.
The Institute for Fiscal Studies think-tank has estimated that exempting NHS and social care workers in England would cost around £90m a year.
News of the exemption came as the government announced a trial for a coronavirus test that does not need to be sent to a lab and gives results in 20 minutes.
It has also been announced that 10 million antibody tests - that check if someone has had the virus in the past - will start being rolled out next week.
Meanwhile, lockdown restrictions in Scotland are likely to be relaxed slightly from next Thursday.
And in Northern Ireland, Education Minister Peter Weir has said the reopening of schools will begin for "key cohort years" in August, followed by a phased provision for all pupils in September.
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