The change offered by Mr Clinton is short of what he promised during his election campaign but the maximum to which he could get the agreement of the Joint Chiefs of Staff. He said that the policy gave more protection to homosexuals in uniform who obeyed all the rules on sexual conduct and was a 'sensible balance' between individual rights and military needs.
Mr Clinton is eager to resolve the politically damaging issue of gays in the military. Senator Sam Nunn, the chairman of the Senate Armed Services Committee, has already said he will try to get Congress to approve a law enforcing a more rigorous ban on homosexuals in uniform.
At the heart of the new policy is a Pentagon directive that drops the requirement for men and women joining the armed forces to disclose their sexual orientation. It says homosexual conduct will be grounds for separation from military service, and defines such conduct as being 'a homosexual act, a statement that the member is homosexual or bisexual, or a marriage or attempted marriage' to somebody of the same sex.
Speaking before a military audience at the National Defense University in Washington, Mr Clinton made no secret of his desire to make more radical change. He said: 'It is not a perfect solution. It is not identical with some of my goals.'
He added, however, that the new policy would end the witch-hunts against homosexuals in the military which in the 1980s led to 17,000 officers and men being dismissed at a cost of dollars 500m (pounds 330m).
The most damaging resistance to Mr Clinton on the issue has come from General Colin Powell and General Normal Schwarzkopf, the leading US military commanders in the Gulf war. General Shwarzkopf said the attitude of US soldiers to ending the ban on gays in the armed forces was the same as that of Iraqi soldiers in Kuwait, forced to obey orders in which they did not believe.
Gay activists reacted with derision to Mr Clinton's compromise. 'This policy is asking gays and lesbians to take a vow of silence and a perpetual vow of chastity if they want to serve in the military,' said Kevin Cathcart, a spokesman for Lambda, the oldest US homosexual rights group.
'Before the military kicked you out for lying. Now they will throw you out for telling the truth,' a spokesman for the Gay and Lesbian Alliance Against Defamation said.
A poll taken by CNN television shows that the issue evenly divides voters, but that opponents of lifting the ban favour yesterday's compromise - dubbed 'don't ask, don't tell, don't pursue' - much more strongly than those who want to end the ban entirely.