By Dr David Whitehouse
BBC News Online science editor
The US Federal Aviation Authority (FAA) has granted a licence to Scaled Composites for a sub-orbital launch of its SpaceShipOne rocket plane.
Breaking the sound barrier
The licence clears the way for an attempt on the X-prize later this year.
The X-prize of $10m (£5.4m) is for the first privately funded, non-governmental body that can launch a three-person craft into space twice in two weeks.
To claim the prize, SpaceShipOne will have to reach an altitude of 100km, the "official" boundary of space.
The FAA approval given to Scaled Composites allows it to expand its flight testing of SpaceShipOne.
The company's chief is Burt Rutan who was behind the design of Voyager, the first aircraft to fly non-stop around the world without refuelling.
SpaceShipOne - along with its carrier mothership, White Knight - was first shown to the public on 18 April 2003. Since then it has undergone extensive tests, and during one powered flight it broke the sound barrier.
It employs a hybrid rocket motor that utilises a combination of liquid and solid-fuel.
It might go into space this year
SpaceShipOne has also undergone extensive glide flights, with the last one carried out last month.
Last December, it was announced that multi-billionaire Paul Allen - a co-founder of Microsoft - is a major investor in the project.
The X-prize was started in 1996 and has many groups registered. Analysts expect it to be claimed this year with Scaled Composites the favourite to take the prize.