ITV welcomed the news that product placement is to be allowed on British television programmes for the first time.
Ministers hope lifting the ban will throw a lifeline to struggling independent broadcasters such as ITV by opening new multi-million pound revenue streams.
The move - which is likely to prove highly controversial and could be announced as early as this week - represents a major U-turn.
But the Government is understood to believe that the "climate has changed", and placement should now be allowed "in certain circumstances".
The shift in the rules will only apply to commercial broadcasters, with the BBC still prevented from promoting products, even when programmes are made by independent production companies.
An ITV spokesman welcomed the move. He said: "If the Government does decide to permit product placement, it will be warmly welcomed by the commercial broadcasting industry and advertisers alike.
"ITV plc has led the campaign for product placement in the UK, which could be an important new revenue stream - as it already is in Europe.
"Reforming the UK prohibition would also be a welcome acknowledgement of the pressures currently faced by an industry in transition. New sources of revenue means better funded content - which can only be good news for viewers."
It is understood the ban will also remain in force for all children's programmes across all networks.
The main factor behind the rethink by ministers has been the financial problems faced by ITV and other commercial broadcasters as the recession hit advertising revenues.
A European parliament directive which came into force almost two years ago also permitted product placement in sport and light entertainment programmes, if national governments allowed it. Most other EU nations have now decided to lift restrictions.
As recently as March the then-culture secretary Andy Burnham insisted the ban would remain, warning that lifting it would raise "very serious concerns" about "blurring the boundaries" between advertising and editorial.
However, his successor Ben Bradshaw - a former BBC reporter - has taken a different view and is poised to announce that the government has accepted the need to lift the ban "in principle".
Mr Bradshaw is set to give a speech to the Royal Television Society this week, when he could announce a three-month consultation on the issue.
Former broadcasting minister Janet Anderson told the Sunday Telegraph: "There is nothing to fear from product placement on British television. I don't think anyone suggests our enjoyment of James Bond films is any less because of the impact of product placement.
"Allowing it would throw an invaluable lifeline to independent television. I'm glad the Government now appears to have changed its mind on the issue."
Both the Tories and the Liberal Democrats have backed changing the current rules.
Under current British law programmes are allowed to use products such as laptops and clothing as props, but are forbidden from receiving payment for the placement.
By contrast, product placement in the US is rife. American Idol, the most watched show on US TV, is notable for its placements, including Coca-Cola logos on the cups of the judges, and Ford, which gives the winners cars.
Logos are blacked out when American Idol is shown in the UK.
Writing in the Sunday Mirror, Big Brother creator Peter Bazalgette insisted introducing product placement was "hugely overdue".
"My prediction is that it could be worth £100 million a year to commercial TV.
"Product placement needs to be done transparently, with credits that make it clear it has taken place.
"But you have to trust the consumer. If it's overdone or tasteless viewers will switch off.
"And it's rife in British television anyway. There's product placement in movies that go on television and in imported American TV shows and dramas.
"And what about those sports events where sponsors' logos are worn on shirts? Product placement won't dramatically change the way we watch TV."