Gay couples in France will be allowed to get married and to adopt children as of 2013, Prime Minister Jean-Marc Ayrault has announced in parliament.
The announcement was part of a keynote speech outlining the new Socialist government's five-year plan.
It confirms an election pledge made by President Francois Hollande.
A number of European nations including Germany, Sweden and Britain already allow gay adoption.
At present only married couples - not civil union partners - can adopt in France.
"In the first half of 2013, the right to marriage and adoption will be open to all couples, without discrimination," Mr Ayrault told parliament.
"Our society is evolving, lifestyles and mentalities are changing. The government will respond to that."
He announced the news during a keynote speech outlining the government's budget and political agenda.
Gays in France make up 6.5% of the electorate, compared with practising Catholics at 4.5%, according to figures released by pollster Ifop.
A survey carried out at the beginning of the year showed 63% of French people are in favour of gay marriage while 56% support gay adoption.
The confirmation of the new law came only days after Paris held its annual Gay Pride parade, which this year was buoyed by the new goverment's promise to legalise gay marriage and adoption rights.
In a symbolic gesture, French Minister for Families Dominique Bertinotti turned out to see the parade floats set off.
European nations allowing gay adoption include Belgium, Denmark, Finland, Germany, Iceland, the Netherlands, Norway, Spain, Sweden and Britain.
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