Health Secretary Patricia Hewitt will vote for a complete ban on smoking in pubs and clubs in England when MPs vote on the plan, the BBC understands.
A partial ban would widen health inequalities, opponents say
Pubs not serving food and members' clubs were to be exempted from a ban.
But Labour MPs and ministers have been given a free vote on the issue - increasing the chances of a total ban.
The move means Ms Hewitt - who differs from her predecessor John Reid on the extent of a smoking ban - will be voting against her department's policy.
Free votes - which allow MPs to vote against the party line - are generally only granted for what are seen as issues of conscience, such as the death penalty or hunting with dogs, rather than for manifesto commitments such as the smoking ban.
SMOKING BAN VOTE
Labour rebel amendment proposes smoking ban in all licensed premises without exemptions
About 70 Labour MPs including Patricia Hewitt expected to vote for this
Tories and many Labour MPs believe amendment goes too far
Some MPs - including health minister Caroline Flint - may seek exemption for private clubs
Public health minister Caroline Flint denied the situation was a "mess".
"I think you have to go sometimes through these processes," she told BBC Radio 5 Live.
"In many respects, Parliament is reflecting the nature of what the debate is out there."
She said ministers wanted to avoid the "terrible situation" of MPs voting for no ban at all - and to make sure the "minimum guarantee" of a partial ban made it on to the statute books.
"Patricia [Hewitt] is supporting that policy but given the opportunity on a free vote she would like to go further. She would like to vote for a more extensive ban," she said.
Ms Flint said she would vote for a ban in all pubs but she thought residential accommodation and prisons should be exempt. She said she had not made her mind up about private members clubs.
About 70 Labour MPs are thought to be in favour of an outright ban - potentially enough to overturn Tony Blair's majority of 66 provided opposition MPs also vote with them.
Labour member of the health select committee Dr Howard Stoate said he expected MPs to "overwhelmingly support" a blanket ban.
"I think Patricia Hewitt pretty much puts the seal of approval on the whole thing. The free vote means she is now able to say what she believes," he told the BBC News website.
He said public opinion had moved "very quickly" on smoking and, as a GP, he could not "stand back and allow some workers to be exposed to second-hand smoke".
Explaining the apparent U-turn over the policy, Downing Street said it had listened to the concerns of MPs who wanted a total ban.
"We recognise the public debate has moved on and that the debate in the entertainment industry has moved on as well. It is sensible to listen to the concerns," the prime minister's official spokesman said.
He added this was a "one off" issue and people and MPs and ministers have particular views on it so it is sensible to allow a free vote on the issue.
"The [prime minister], as with previous free votes, will not signal in advance what his position is because he does not want people to be unduly influenced."
Downing Street said it had not been influenced by a report by MPs and peers claiming the existing plans breached human rights legislation.
Conservative and Liberal Democrat MPs have already been granted a free vote on the issue.
Shadow health secretary Andrew Lansley said he would be voting for a ban in all pubs but backed an exemption for private members clubs where children have no access.
He said he wanted "a workable, fair and effective outcome which protects children, staff and the public from the clear dangers of second-hand tobacco smoke".
A partial smoking ban was promised in Labour's election manifesto but Ms Hewitt drew up plans for more comprehensive restrictions when she took over as health secretary from Mr Reid.
Following a behind-the-scenes Cabinet battle Ms Hewitt was eventually forced to climb down and revert to the partial ban set out in the manifesto.
But pressure from Labour backbenchers appears to have prompted the decision to allow the free vote. The vote is likely to take place in two weeks time.
Earlier on Wednesday, a joint committee of MPs and peers reporting on Wednesday suggested the partial ban would breach human rights law.