People suffering from HIV, cancer or mental illness are to receive unprecedented protection at work under new rights, the Government said yesterday.

Employers will no longer be able to sack staff who reveal they have been diagnosed with a serious illness such as Aids or multiple sclerosis. Staff suffering from stress will also receive greater protection under new rules recognising a range of mental illnesses as a disability.

The measures to protect people with progressive illnesses from discrimination by their bosses, announced yesterday by Andrew Smith, the Secretary of State for Work and Pensions, were welcomed as a major breakthrough by disability groups.

They have complained that employers have been firing workers with illnesses such as HIV or multiple sclerosis before they begin displaying symptoms. The companies get rid of them because they fear the person may have to spend time in hospital or take sick days.

Until now this has been legal because people have only been protected under discrimination law if they display disabilities as a result of their condition. Under the new rules, people will be protected when they contract the disease, not just when they begin to show symptoms of it - which in some cases can take years to materialise.

The Terrence Higgins Trust, which campaigns for HIV sufferers, welcomed the extension of rights, to be introduced in a new disability discrimination Bill. "This is welcome news because it will help to prevent people with HIV from being discriminated against from the point of diagnosis," said Thomas Yocum, a policy officer.

"Until now, people living with the virus have been fired from their jobs, thrown out of their flats and refused services simply because they are HIV positive. This legislation should begin to put an end to that."

The Government also promised to extend rights to people suffering from depression, stress, autism and other conditions, including self-harming.

At the moment only those with mental illnesses that are "clinically well recognised", such as schizophrenia, gain protection under disability rights law. But the draft disability discrimination Bill now being considered will extend protection to other "mental and physical impairments" if they affect an employee's ability to perform day-to-day activities.

The Disability Rights Commission said the change was crucial because impairments such as stress and depression had been recognised as serious conditions.

"Many people with mental health impairments had to experience embarrassment, ignominy and stress when bringing cases under the Disability Discrimination Act. In many circumstances they were legally defined as not being covered by the law and denied their rights because their condition was not clinically recognised," said Bert Massie, the chairman. "The change announced today, which I warmly welcome, will finally end this perverse injustice."

Andrew Smith said: "Disability rights is about more than jobs. It is about people's equal worth as individuals so that they are not disabled by the preconceptions of others."

But the Tories cast doubt on whether people suffering from bouts of depression would be covered, if their illness was not "long term".

"I think their response throws into doubt the assistance that people suffering from depression will receive," said Paul Goodman, the shadow minister for disabled people.