Mr Livingstone was expelled for running as an independent in 2000
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Labour's ruling body has voted by 25-2 in favour of moves smoothing the way for London Mayor Ken Livingstone to be readmitted to the party.
A final decision is expected in January if the National Executive Committee receives reassurances from him that he will abide by Labour's constitution.
Mr Livingstone could then be Labour's candidate in the 2004 mayoral election.
He was expelled from the party for five years after standing as an independent in the 2000 London mayoral elections.
The decision comes despite Chancellor Gordon Brown and Deputy Prime Minister John Prescott being among ministers believed to be opposed to the move.
'Missing each other'
On Tuesday, Mr Livingstone said he had formally applied to rejoin Labour.
He told a news conference at London's City Hall: "There are people who get married, then get divorced, have a few years apart and then decide they've missed each other terribly.
"I see it as very much like that - and they get remarried."
Mr Livingstone argued he had moved forward the government's agenda "more spectacularly" than anywhere else in the country.
"Of course they want me back," he said.
The mayor said he was ready to go before a party board to take questions about whether he was ready to stick to Labour principles.
"I like nothing better than talking about myself among colleagues," he said.
Labour officials had never asked him whether he would be willing to sign promises not to speak out on issues which could embarrass the government, he added.
New Year meeting
Outside the National Executive Committee (NEC) meeting, member Tony Robinson, famed for his portrayal of Baldrick in the BBC comedy Blackadder, said there were still "a lot of hurdles to jump" before Mr Livingstone could be readmitted to the party.
"We have agreed that our officers of the NEC should meet him after Christmas and see whether or not we can get guarantees from him that he would abide by the Labour Party constitution and that his manifesto would reflect the Labour Party's manifesto," he told BBC News.
If that happened, his candidacy would go forward for approval by the London Labour party.
If 50% of its members supported him, he would be the party's official mayoral candidate.
Bush visit
Downing Street refused to be drawn on the possibility of Mr Livingstone rejoining Labour.
The prime minister's official spokesman said Mr Blair recognised the congestion charge had been a "successful policy".
But he also acknowledged the difference in opinion recently shown over President George Bush's state visit to London, which Mr Livingstone opposed.
But Conservative mayoral candidate Steve Norris branded the move to bring Mr Livingstone back into the Labour fold as a "cynical deal" to help the mayor pay for his re-election campaign.
"Londoners will feel let down," he said.
Liberal Democrat candidate Simon Hughes said: "There is no evidence that either Mr Livingstone or Labour have changed their
ways since they were last a couple."
Board backing
Frank Maloney, the boxing promoter and UK Independence Party candidate, said he was "disgusted" by the turn of events.
On Monday, the London Labour Board, which includes MPs, trade unionists, and members of the London Assembly, overwhelmingly endorsed a plan that he should be asked to rejoin.
That came after the incumbent Labour candidate for mayor, Nicky Gavron, told them she was happy to stand aside for Mr Livingstone.
But ex-Labour leader Neil Kinnock has said he remains "fundamentally and irretrievably" against Mr Livingstone being allowed back into the Labour Party.