The two main opposition parties in Bangladesh have welcomed the interim government's decision not to force their leaders into exile.
Will the two women be able to resume their political careers?
They say it is a victory for the rights of ordinary Bangladeshis.
On Wednesday the government lifted restrictions on former Prime Ministers and bitter rivals, Khaleda Zia and Sheikh Hasina.
The restrictions were part of sweeping measures the government said were needed to fight corruption.
Sheikh Hasina, the leader of the Awami League was no longer banned from returning from abroad, a government statement said.
"My gratitude to the people of Bangladesh, the world media, world leaders and the friends of Bangladesh. Everybody put pressure on the government, and because of that pressure they have withdrawn the ban," she told the BBC's World Today programme.
The government also said there were no restrictions on the movements of Khaleda Zia, head of the Bangladesh Nationalist Party (BNP), who has been held under virtual house arrest in Dhaka.
She has reportedly been under pressure to go into exile in Saudi Arabia.
"It's a people's victory," the BNP's Hannan Shah said, Reuters news agency reports.
The military-backed government says it wants an end to corruption
The Awami League's general secretary, Abdul Jalil said: "It has been reasserted that people's democratic and fundamental rights cannot be robbed."
The interim government's U-turn has also been broadly welcomed in the press.
Wednesday's statement said that the government's efforts to stop Sheikh Hasina from returning to Bangladesh were being lifted "in view of the views expressed in the media and different quarters".
Sheikh Hasina was prevented from flying back to Dhaka on Sunday.
She still faces murder charges after Awami League members allegedly killed members of a rival political party during protests in Dhaka last year against the caretaker government prior to the imposition of a state of emergency.
The statement made no reference to comments by the US State Department earlier on Wednesday that democracy in Bangladesh was under threat.
"If the caretaker government does not take right decisions, there is a real threat to Bangladesh democracy and nobody wants to see that," spokesman Sean McCormack said.
Sheikh Hasina says the murder charges are baseless
The government's statement went on to say that - contrary to media reports - there had never been any pressure on Bangladesh Nationalist Party (BNP) leader Khaleda Zia to leave the country, and there were no restrictions on her freedom of movement.
It is not clear whether Wednesday's announcement means that the two women will be free to resume their political careers and take part in elections which the government says will be held as soon as corruption in the country has been eradicated.
Khaleda Zia's family said last week that they had been told to prepare for imminent exile in Saudi Arabia, but the Saudi Arabian government reportedly declined to allow her into the kingdom - apparently because it was reluctant to take in an unwilling guest.
Attempts by the government to find another country for her to be exiled seem to have failed.
Khaleda Zia's son, Tareque Rahman, is one of around 160 politicians, businessmen and civil servants who have been arrested by the military-backed caretaker government on corruption charges.
The drive against corruption seems to have been welcomed by many ordinary Bangladeshis tired of seeing politicians and their relatives siphoning off the country's wealth.
The BBC's John Sudworth in Dhaka says that after days of political manoeuvring with the intention of sending the country's two most powerful political leaders into exile, the emergency government has seemingly backed down.
He says that the government seems to have badly misjudged the mood of the people.
It has argued that reform of the political system would be impossible while the two former prime ministers are still on the scene.
Our correspondent says the two women seem to have won this particular battle with the government - which is perhaps a sign of just how much political clout they still wield.