In an announcement at the presidential palace in Jakarta, flanked by his cabinet and senior generals, he announced his "readiness to accept peace-keeping forces through the United Nations from friendly nations to restore peace and security in East Timor, to protect the people, and implement the result of the direct ballot of the 30th of August 1999".
The UN Secretary-General, Kofi Annan, welcomed the announcement, as did President Bill Clinton, although his National Security Adviser, Sandy Berger, injected a note of caution, saying "the Devil's in the detail". A statement from the Indonesian military, which has never before allowed armed foreign troops into its territory, said it would "help and co-operate".
But timing will be everything. While Mr Habibie told UN ambassadors that Indonesia would accept the force "immediately", UN experts said it could take three to six weeks before that happens. It is likely the force will be made up of soldiers from several Asian countries, Australia and perhaps the United States. Britain has indicated it will provide a symbolic troop contribution - 250 Gurkhas.
There was jubilation inside the UN Assistance Mission in East Timor (Unamet) compound in Dili, the capital, where 1,000 refugees have taken sanctuary. They greeted Mr Habibie's announcement as if it was the lifting of a death sentence.
But reports from East Timor suggested there was no let-up in the terror. In the town of Dare, 10km from Dili, panic spread among 30,000 refugees who have taken sanctuary near a Catholic seminary.
David Wimhurst, the Unamet spokesman, said: "The Indonesian army is advancing up the hill, slaughtering refugees. There must be immediate international intervention to stop the attacks and killings."
In Darwin yesterday the UN Commissioner on Human Rights, Mary Robinson, raised the possibility of war crimes prosecutions of Indonesian generals: "Thirty-thousand people could be being killed as we speak, and we don't know, and we can't be sure."
Church sources in Darwin said that a Dutch-born Indonesian priest, Karl Albrecht, was shot dead at his home in Dare, while other reports suggest huge numbers of displaced people are at risk of starvation.
Up to 300,000 of East Timor's 850,000 people have been turned into refugees and many are said to be foraging for bananas and roots in the jungle, under constant threat of attack.
The East Timorese guerrilla leader, Xanana Gusmao, warned of a humanitarian disaster. "We are facing a situation whereby the whole population of East Timor has been uprooted and is displaced and devoid of any means of survival," he said.
Undoubtedly Jakarta was driven to make the about-turn by the chorus of world opprobrium that has built over recent days.
It faced economic sanctions, including the possible withholding of IMF loans, during a period of fragile recovery.
But Indonesia may be conceding less than at first seems apparent. Under agreements in May it was expected to endorse the vote for independence by early November and surrender the territory to UN control at that time anyway. Thus the timetable for peace-keepers may not be much changed.
Moreover, for as long as the deployment of peace-keepers is delayed, the army will remain in control. Finally, at a stroke Mr Habibie has transferred responsibility for what happens next in the province to the UN.
Nor, by the same token, is it clear how much the international community has gained.
For now, public pressure for a forced invasion of East Timor, something for which no government had the stomach, is in abeyance.
But it could quickly rise again if violence once more erupts in the province in the days and perhaps weeks before the UN force is deployed.Reuse content