Gurkhas will be given a "significant" boost to their pensions, the Ministry of Defence has announced.
Ex-Gurkhas have campaigned for equal rights in the British army
The decision, which will benefit the 26,500 Gurkha pensioners mainly living in Nepal, will cost about £6m a year.
It means most pensioners who were ranked as Corporal or below will receive a 19% rise.
The increase, backdated to January 2006, follows a long-running campaign by veterans of the elite Nepalese unit to secure higher pensions.
In a written statement to MPs, junior defence minister Derek Twigg said: "I am pleased to inform the House that there will be a significant increase in Gurkha pensions backdated to January 2006.
"The increase is in line with the tripartite agreement which established a linkage between Indian Army pensions and those of the British Brigade of Gurkhas.
"It has always been our policy to ensure a fair deal for the 26,500 Gurkha pensioners, mainly living in Nepal, who will receive an increase in their pension rates."
The rise is in addition to the annual inflationary 7% increase they received earlier this year.
Gurkhas have fought for Britain for centuries, but their pensions have historically been at lower levels than UK counterparts because many retire to their native country where the cost of living is lower.
Mr Twigg added: "This increase sustains Gurkha service pensions at a fair and appropriate level and demonstrates the government's continuing commitment to the retired Gurkha community in Nepal."
The Gurkha pension scheme currently costs some £33 million a year and it is calculated that the increase will add a further £6 million.