The Foreign Office confirmed the move after a furore over allegations of official collusion with the breaking of the ban by a British company, Sandline International. A Customs and Excise investigation concluded that Sandline could not be prosecuted because of the Government's role, and an independent inquiry into the affair is now under way.
The arms embargo was imposed last October after the Sierra Leone president, Ahmad Tejan Kabbah, was overthrown and exiled to nearby Guinea.
Britain and the United Nations supported Kabbah's return to power, and the resolution said that the UN Security Council would return to the issue if he was reinstated.
Since his return to the capital, Freetown, in March, President Kabbah's troops have faced fierce attacks in the countryside by soldiers loyal to Johnny Koroma, who had over- thrown him and was in turn ousted.
A Foreign Office spokes-man said a new resolution was being drafted in the light of changed circumstances.
"Work is in hand in New York on that and we hope the new resolution can be drafted and adopted soon," he said.
"Our view is now that the conditions that were required in the original resolution have been satisfied.
"With the restoration of democratic government and constitutional order, the time has come to lift the ban on arms sales to the government but we should maintain the embargo against non-governmental forces."
The Sierra Leone government and Ecomog - the West African peacekeeping force that overthrew the junta and brought President Kabbah back from exile - would be exempted from a new British-backed arms embargo, he added.
But he stressed that the ban would not be lifted for arms supplies to non-governmental forces, so Koroma's RUF soldiers would still not be allowed to bring in weapons. Ministers and officials have fiercely denied any prior knowledge of arms shipments to Sierra Leone.
Reports last weekend suggested that UN lawyers believed that supplying Ecomog with arms might not have been a breach of the embargo after all.
But the Foreign Office made clear last night that the UN legal opinion was specific advice about Ecomog, and would not have affected Sandline's position.
The Foreign Office admitted that its interpretation of the existing resolution was at odds with that of the UN lawyers, but defended its decision to report Sandline's sales of arms to Sierra Leone.
Consultations on the issue are expected to continue next week.