Mr Howard, who last year refused to refer the case to the Court of Appeal, has now instead decided to disclose to Silcott's lawyers material so far withheld and agreed to pay part of his costs, incurred in preparing a judicial review scheduled for next week.
Silcott, 35, was cleared by the Court of Appeal in 1991 of the murder of PC Keith Blakelock during the 1985 Broadwater Farm riots, and last year was awarded £10,000 compensation for the wrongful conviction.
But in 1986 he was also convicted of the fatal stabbing of Mr Smith and sentenced to life imprisonment. In 1992, his lawyers sent a dossier of new evidence to the Home Secretary supporting Silcott's claim that he acted in self-defence.
But last year Mr Howard decided not to reopen the case.
Yesterday, Adrian Clarke, Silcott's solicitor said: "We first asked the Home Secretary to reopen the case in June 1992. It took him until January 1994 to make a decision - a decision which he has finally accepted was arrived at unlawfully. "The Home Secretary should now refer the case immediately to the Court of Appeal."
Although a Home Office spokeswoman argued that the decision did not mean Silcott's case was being reconsidered -that would only happen if his lawyers made further representations after they had seen the disclosed material - further representations are a certainty. Mr Howard's legal advisers have already had to review the case to decide not to fight the planned judicial review hearing.
Silcott's MP, Bernie Grant, said: "The Home Office is playing with words. The facts of the matter are that they will be reconsidering the case, after fresh representations will be made following the disclosure."
The decision not to contest the judicial review was taken in the wake of a landmark Court of Appeal ruling in the case of the men convicted of the Carl Bridgewater murder and three others, which halted the secrecy surrounding the way the Home Secretary reviewed claims of miscarriage of justice. The judges said the existing system for dealing with claimed injustice was "significantly too closed" and ordered him to hand over all expert and other relevant evidence in the cases.
In the light of that ruling Mr Howard now has to make available material in the Silcott case.
Silcott, speaking from Swaleside Prison on the Isle of Sheppey in Kent, said: "I am not surprised that he has been forced to concede that his decision in my case was unlawful."