Gallagher plans to write to the Football Association informing them that he made a "genuine error of judgment" in Oakes' case - and that will give hope to Arsene Wenger in his bid to force another referee, Uriah Rennie, into a similar change of heart over the red card he showed Patrick Vieira for use of the elbow in Monday's game at Charlton.
While Villa's hopes of continuing their quest for the Premiership title will be vastly improved by the news, Arsenal's chances of retaining the championship could be harmed irreparably by a suspension for Vieira, according to their former player Alan Smith.
The Oakes reprieve came after Gallagher reviewed video evidence with his linesman, Dave Horlick, and the Premier League referee's officer, Philip Don. The incident occurred with Villa trailing 1-0 in a game they went on to lose 2-1, and one which left the Villa manager, John Gregory, fuming with Gallagher.
Oakes caught a loose ball just inside his own area with his momentum carrying him forward, although he immediately released the ball as he reached the 18-yard line. Gallagher, however, decided to issue a red card after the linesman had flagged, wrongly as it turned out, to indicate that Oakes had handled the ball outside the penalty area.
The furore, with the Sky cameras proving Oakes did not handle the ball out of his area, spurred Gallagher to look at video replays along with Horlick and Don.
A Premier League spokesman, Mike Lee, said: "Dermot Gallagher, in consultation with Philip Don, the Premier League's referees' officer, has reviewed the video of the sending-off of Aston Villa goalkeeper Michael Oakes in the game against Blackburn.
"In discussion with referee's assistant Dave Horlick, they have concluded that there was a genuine error of judgment by the assistant.
"Mr Gallagher will now be writing to the FA to inform them of his conclusion, with a view to the sending-off not being dealt with as a disciplinary matter."
The matter is now in the hands of the FA, who are certain to accept the reconsidered views of Gallagher and quash Oakes' red card, according to Don.
Don said: "At the end of the day we want to see the right decisions are made and Dermot has agreed to write to the FA and inform them an error was made.
"I would now expect the FA to reverse the decision once they receive Dermot's letter and his report.
"It's obviously good news for Aston Villa, but if we are seen to be making the right moves, then on this occasion it's to the credit of the referee's assistant."
Meanwhile, Vieira is due for a suspension after he became Arsenal's sixth player this season to be sent off, in Monday's game at Charlton. The Gunners have also accumulated 46 yellow cards between them this season, a record that their former striker Smith feels will seriously disrupt their chances of defending the title.
"It is a problem," said Smith, who was booked just once in his entire Arsenal career, in the 1993 FA Cup final replay against Sheffield Wednesday at Wembley. "With all the injuries Arsenal have had the last thing they need is to lose players like Vieira through suspension.
"I felt for him because his sending-off at Charlton looked harsh, and if the suspension is upheld then they will miss him."
Smith, like everybody else, cannot understand why Arsenal attract such a bad record, but he fears it will be harmful in the long-run.
He said: "It has been a long-standing problem, the discipline at Arsenal. It is something which doesn't get any better.
"Arsene needs all his boys together. It is bad enough that they are not going to have Nicolas Anelka and Dennis Bergkamp for a while through injury - that will affect them without having to worry about suspensions.
"In the final run-in last season Arsenal had everybody available, and I think they need that if they are going to have a good chance of retaining their title."
Arsenal have appealed to referee Rennie to reverse Vieira's red card after television evidence had suggested the offence was not as serious as it might have seemed.
Besides Vieira, the other five Arsenal players to be dismissed this season are Petit, Lee Dixon, Martin Keown, Ray Parlour and Gilles Grimandi.Reuse content