About 3,500 Montserratians have already come to the UK on temporary two- year visas since volcanic eruptions devastated most of the island's habitable land in 1995.
They will now be able to apply for permanent residence, as will the rest of Montserrat's 11,000-strong native population. The only exception will be for Montserratians who have already settled permanently in other countries.
As the announcement was made in a Commons written reply, the Immigration Minister, Mike O'Brien, visited the Montserrat Project in Islington, north London, which helps Montserratian refugees in the UK as far apart as Durham, Birmingham, Bristol and Preston.
As his staff handed out letters outlining the scheme, to be forwarded to the island, he accepted that many Montserratians had faced difficulties in finding secure accommodation and employment when their time in Britain was so limited.
He said that if the situation on Montserrat improved, many islanders would want to return, but that was their decision. "It is now a matter for Montserratian people to decide how long they wish to stay here."
The co-ordinator of the Montserrat Project, Lazelle Howes, who herself faced the prospect of having to leave Britain until today's announcement, said she was "delighted" at the move.
"Our people have had three years of uncertainty and anxiety. This decision will empower Montserratians to make the positive contribution to Britain that I know they are able to make."
The Soufriere Hills volcano erupted last summer, devastating large areas of the island, destroying homes and farmland and forcing most of the inhabitants to flee to Britain or neighbouring islands, such as Antigua. Britain has committed itself to aiding the recovery of Montserrat, and in February announced plans to build 100 homes there and give pounds 4.8m in aid to the island.Reuse content