The so-called claimant count was 1.59 million in February after a fall of 32,300, the biggest monthly reduction since the end of 1997.
Total unemployment, including those not eligible for benefit, was down by 33,000 over the quarter to January to 2.45 million, the lowest for almost a year, and the biggest three-monthly fall for almost three years.
But the good news was tempered with other figures showing a record 8.16 million people classed as economically inactive, while the number of people out of work for longer than a year jumped by 61,000 to 687,000, the worst figure since 1997.
The number of people in work also fell in the latest quarter, down by 54,000 to 28.86 million, giving an employment rate of 72%.
Officials at the Office for National Statistics said the reason unemployment and employment were both falling was the rising numbers classed as economically inactive.
The number of inactive people, which includes students, those on long-term sick leave or who have given up looking for work, increased by 149,000 over the three months to January.
Unemployment among 18 to 24-year-olds fell by 34,000 to 715,000, but for over-50s, joblessness rose by 14,000 to 398,000.
The unemployment rate fell by 0.1% to 7.8%, the first quarterly fall for almost two years.
The claimant count has fallen for three out of the last four months.
Other figures today showed a 39,000 increase in job vacancies to 480,000, although the number of jobs in the UK fell by 119,000 to 30.75 million.
The number of workers in the public sector increased by 7,000 to 6.1 million in the last few months of 2009, while private sector employment fell by 61,000 to 22.76 million.
Unemployment in the regions between November and January was:
Region Total unemployed Change on quarter Unemployment rate
North East 120,000 minus 1,000 9.5%
North West 290,000 plus 3,000 8.6%
Yorkshire/Humber 230,000 minus 7,000 8.7%
East Midlands 173,000 plus 1,000 7.5%
West Midlands 254,000 minus 17,000 9.5%
East 196,000 plus 1,000 6.6%
London 359,000 minus 20,000 8.8%
South East 274,000 minus 5,000 6.2%
South West 164,000 minus 12,000 6.2%
Wales 133,000 plus 9,000 9.2%
Scotland 205,000 plus 16,000 7.6%
N Ireland 52,000 minus 2,000 6.3%
The economic inactivity rate is now 21.5% of the working age population, up by 0.9% on a year ago.
The ONS also reported that average weekly pay was £442 in January, an annual growth rate of 0.9%, up by 0.2 percentage points from the previous month.
Work and Pensions Secretary Yvette Cooper said: "The fall in unemployment for the third month in a row is very welcome, but we should remain cautious. We're not out of the woods yet and we are still determined to do more to support jobs and help the unemployed this year.
"The figures show the investment in jobs, education and training places is making a real difference. Half a million fewer people are out of work than anticipated at the time of last year's budget - saving over £10 billion as a result.
"However, now is not the time to cut back on support for jobs. We know things will be difficult for some time, and unemployment in the Eighties and Nineties rose for years after the recessions finished.
"That is why we plan to increase help to get people back into jobs this year, not cut it back, so we can support the jobs of the future."
Ministers said that since the start of the recession there has been a fall of 75,000 people claiming inactive benefits, including incapacity benefit, employment and support allowance and income support.
The Government today announced the funding for almost 7,000 Future Jobs Fund jobs, bringing the total so far up to 117,000. The new positions include jobs as sports coaches, youth workers, solar panel installers, housing and classroom assistants.
Employment minister Jim Knight said: "While it's good news that the number of young people claiming unemployment benefit has fallen for the fourth month in a row, there is no let-up in our investment to ensure every young jobseeker gets the chance to find work and make a future for themselves.
"I am delighted to announce a further 7,000 Future Jobs Fund jobs for young people as part of Government's unprecedented guarantee that 18-24-year-olds who are unemployed for six months will get a job, a work placement or a training opportunity.
"We are determined to give them the chance to develop skills and get that all-important foot on the career ladder."
Ministers still expect increases in unemployment before the summer.
Paul Kenny, general secretary of the GMB union, said: "At long last, the Labour Government policies to support the economy are kicking in.
"This fall in unemployment is very welcome. The recovery is still very fragile and things would have been a lot worse than they are without specific Government initiatives to save jobs.
"We now face the prospect of Tory-controlled councils cutting hundreds of thousands of jobs, which will not help the recovery one iota. Tory-led Surrey County Council, where GMB is currently dealing with 1,000 job cuts, is not untypical."
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