Women will be given every encouragement to give birth at home if that is their preferred option.
Home births are still a tiny minority
The Department of Health says it wants to end assumptions that a hospital is always the best place to have a baby.
Health Secretary Patricia Hewitt has commissioned work into how to make home births more available.
The National Childbirth Trust welcomed the move, saying currently women were often discouraged by doctors from considering a home birth.
Expectant women will now be given more choice about giving birth either in hospital, at a birthing centre or at home.
However, women with a history of complications will still be urged to give birth in a hospital.
Office of National Statistics data showed there were 15,198 home births in 2004, up 7% on the 14,204 in 2003.
However, this represents just 2% of the total number of births each year in the UK.
A Department of Health spokesperson said: "We are committed to offering all women the choice of how and where they give birth, and what pain relief is available.
"The government underlined its commitment to delivering choice in maternity services in its 2005 manifesto, the National Service Framework for children and maternity and the recent White Paper Our Health, Our Care, Our Say.
"All these services will be offered within the context of what is safe and clinically appropriate care for each individual woman.
"We also want every woman to be supported by a named midwife throughout their pregnancy, and for services to be linked to those provided in Children's Centres."
Belinda Phipps, NCT chief executive, said flawed research from the 1970s which falsely concluded home births were not safe had informed government policy for decades.
In fact, she said there was a well of evidence to suggest that home births were at least as safe as giving birth in hospital.
Patient satisfaction levels were higher for home births, and simply booking a home birth led to a halving of the Caesarean section rate, she said.
"It has taken 30 years for the government to realise that the policy of pushing every woman giving birth into hospital was misguided. It would be lovely to see it reversed," she said.
Dame Karlene Davis, general secretary of the Royal College of Midwives, said: "Women should have the freedom to choose how and where they give birth.
"This will benefit the majority of women, who are able to have a normal birth, but at present are denied the choice mainly because of ongoing staff shortages."
However, she warned that the initiative could be stalled without sufficient resources.
Shadow Health Secretary Andrew Lansley said giving women a choice over where they gave birth was a fundamental right.
But he added: "It comes as no surprise that as hospitals are facing critical cut backs because of deficits, the Health Secretary declares that more women should give birth at home.
"There are real concerns over the provision of services: at least three-quarters of maternity units are experiencing some level of staffing shortage, half of all trusts are thought to be operating a recruitment freeze and the number of home visits by midwives is declining in some areas."