Peers have voted in favour of allowing telephone intercept evidence to be used in court in organised crime cases.
Phone tap evidence is presently not admissible in court
The Serious Crime Bill amendment was brought by former law lord Lord Lloyd, and approved by 182 votes to 121.
It was a defeat for the government, which has opposed the use of the evidence because it says it would put intelligence sources at risk.
But Lord Lloyd said it was used in other countries and "simply does not make sense" not to do so in the UK.
Several peers pointed out it was being used safely in several countries, including the US and Australia.
Home Office Minister Lady Scotland told the House of Lords the government was not opposed to the idea on principle, but would not allow the use of such evidence until "it was safe to do so".
But Lord Lloyd said: "There is no prospect of any judge in the High Court ordering the disclosure of sensitive material.
"What is lacking on this issue is not the ability to introduce this, it is a lack of political will to make the decision. This House should now make the decision for the government."
Former Chief Inspector of Constabulary, the crossbencher Lord Dear, added: "I find it amazing that we are the only major country in the world which does not use this sort of evidence in court."
The government has opposed the use of intercept evidence but the Attorney General Lord Goldsmith has said he now favours allowing it to be used in court.
Metropolitan Police chief Sir Ian Blair also backs it, but intelligence chiefs are against it, arguing it could cost too much and jeopardise operations.
In the Lords on Wednesday Conservative Baroness Park, a former senior officer in MI6, said she was worried it would be extended to terrorism case.
"I remain convinced that the dangers to sources and to highly sophisticated methods, is incontestable. It's not just conventional telephone taps, which is largely what is being used in other countries.
"We are talking about something that, once it is lost, will be extremely difficult to replace."
Baroness Scotland said the way foreign countries used intercept evidence was different to the UK. She said intelligence agencies' work was not produced in evidence and was "walled off" from police intercept work.
In the UK the intelligence and police agencies worked "hand-in-hand", she said, adding: "Once you dismantle the protections on intercept material, you dismantle the protections for all intercept material."
The Bill is at its report stage in the Lords and the amendment can be overturned at a later stage.