The Northern Ireland (Offences) Bill says that anyone accused of terrorist offences committed before 10 April 1998 will be tried by tribunal, but will be released under licence if found guilty.
The measure was attacked yesterday for denying justice for relatives of people killed during the Troubles, but Tony Blair defended it as part of the peace process.
"The measures we are introducing are actually designed to end terrorism, not further it," he told MPs.
Peter Robinson, the deputy leader of the Democratic Unionist Party, said: "The Government have treated victims with disdain as they have sought to appease Sinn Fein/IRA. Pain is to be heaped upon pain to allow fugitives from justice who have committed some of the most heinous atrocities in our history to freely return to a life in Northern Ireland."
The move was also attacked by the Conservatives. The shadow Northern Ireland Secretary, David Lidington, said: "This obnoxious Bill is an amnesty for terrorists in all but name. How ironic that this comes on the same day as the Government tries to ram through Parliament its plans for detaining terrorist suspects for up to 90 days without charge."
Those who could benefit from the Bill include: Pol Brennan, one of 37 IRA prisoners who broke out of jail in 1983; the former Sinn Fein MP Owen Carron, who fled to the Republic of Ireland in 1986 after being arrested for possession of an AK-47 rifle; and Rita O'Hare, Sinn Fein's publicity officer in the US, who absconded on bail 30 years ago while awaiting trial for the attempted murder of British soldiers.