MP Andrew Rosindell has long campaigned for the change
Three union flags - rather than the current one - are to be flown above Parliament in future.
Commons Speaker John Bercow said the flags would also be used all year round, rather than just on days when Parliament sits, as happens now.
This brings the Palace of Westminster into line with Whitehall departments.
The moves follow a campaign by Tory MP Andrew Rosindell, praised by Mr Bercow for showing "tenacity reminiscent of a Staffordshire bull terrier".
Currently one union flag is flown from the Victoria Tower of the Palace of Westminster, but not the building's other two flagpoles.
'Sense of triumph'
I hope you feel a proper sense of triumph of what you have achieved in this matter which you have, as you indicated, pursued over a lengthy period with, I may say, a tenacity reminiscent of a Staffordshire Bull Terrier
No union flag is flown while Parliament is in recess, whereas Whitehall departments display them every day of the year.
In the Commons, Mr Bercow told Mr Rosindell: "Following a discussion of this important matter, the [Commons administration] committee agreed to recommend to me that flags should indeed be flown on all three flagpoles on the estate every day of the year, taking account of the usual ceremonial occasions."
Mr Rosindell is founding chairman of the All-Party Parliamentary Flag Group and introduced a Union Flag Bill last year, which did not make it into law.
He criticised the government earlier this year when a plastic Union flag was hung upside down at the signing of a trade agreement with China in Downing Street.
Mr Rosindell told the BBC: "It's fantastic news that we are going to have the Union flags flying all year round. It's the flag of the British people.
"The old restrictions made no sense. It was all a bit of a muddle about the rules.
"It was really silly that other buildings, like Buckingham Palace and Whitehall departments, flew the flag and we didn't."
The Union flag - more commonly described as the Union Jack - has been in use since the Act of Union between Great Britain and Ireland came into force in 1801.
Shortly after he became prime minister in 2007, Gordon Brown scrapped a rule saying it could be flown above Downing Street only on certain days of the year.