Home Secretary David Blunkett says he intends to remove the long-standing ban on prison officers taking industrial action.
Blunkett's offer is a thank you to prison officers for embracing reform
The government hopes the goodwill gesture will lead to changes in working practices inside Britain's jails.
Mr Blunkett said he would listen to the Prison Officers Association (POA) - as long as the union's members listened to him.
The POA's leader Colin Moses said the action meant "a great deal" to prison officers and would enable them to enter "a partnership of equals" with the government.
The home secretary received enthusiastic applause when he announced the agreement at the POA's annual conference in Southport on Wednesday.
It may be psychological. It may be a pyrrhic victory, but if that is necessary to change people's attitude ... then let's go for it
The warmth of the welcome was in stark contrast to the heckling Home Office Minister Beverley Hughes received last year.
Mr Blunkett said lifting the strike ban recognised the POA's "professionalism", its keenness to modernise, reform, change and to have its voice heard, while being prepared to listen to the government.
The home secretary said he was laying the order restoring trade union rights so that prison officers "can see that we are taking seriously the promise that was made".
Measures banning prison officers from taking industrial action were introduced in 1994 by the previous Tory government under the Criminal Justice and Public Order Act, after a series of strikes over a number of years, including the 1990 Strangeways walk-out.
As shadow home secretary, Tony Blair wrote to the POA saying it should have the same working rights as any other public servants.
We want all the rights of every other worker in Britain
The POA signed a voluntary no-strike agreement two years ago.
After his speech, Mr Blunkett said the POA's change of leadership had influenced his decision to reinstate union rights.
"Colin Moses has made it clear that he wants an entirely different relationship, both with the management in the prison service and with the government," he told BBC Radio 4's the World at One.
"There's been a realisation that knocking bells out of each other really doesn't help."
Mr Blunkett admitted the new "partnership approach" would look "very odd" from the outside, but it was "actually for the best of outcomes".
"If we have got a no strike agreement and they wish to remove the order that imposed that nine years ago, and that will change the whole nature of their response to the reform agenda that I am putting in place, then it makes sense from my point of view to do that," he said.
"Were the voluntary agreement to break down, we would have the authority and power under the law to bring back the requirements that would protect the prison service and protect the public.
Blunkett: Prison officers are not 'minders'
"I think from their point of view the restoration of union rights and the ability to voluntarily agree with us rather than have something imposed makes a difference.
"It may be psychological. It may be a pyrrhic victory, but if that is necessary to change people's attitude and to back the new leadership who want reform, who want to modernise the system, then let's go for it."
Mr Moses said his members simply wanted "all the rights of any other worker in Britain and every other worker who belongs to a trade union".
"It means quite a lot to us - infact a great deal," he said. "What it does mean is that we have a right to ask our members their views, gives us a right to ballot our members for their views and it gives us a right to enter a partnership and a partnership of equals."
Shadow home secretary Oliver Letwin said the proposal seemed "perfectly sensible".
"If you can have peaceful and cordial relationships and yet be sure that there will not be strikes in the prisons then this is a sensible relationship," he told the same Radio 4 programme.