Local media reports said the government decided to support the move in order to persuade the pro-Islamist Virtue Party to approve a package of economic reforms. But ministers have denied that there was any formal deal.
Necmettin Erbakan became prime minister in 1996 at the head of Turkey's first Islamist-led government, before pressure from the country's powerful military helped force him out of power last year.
He was accused of pursuing anti-secularist policies in violation of the Turkish constitution.
He was subsequently banned from politics for five years, but now the law has been changed.
Opposition parties stand to gain
Mr Erbakan will still not be able to lead, or even join, the Virtue Party, which his supporters founded after his downfall.
But constitutional experts say he will now be eligible to stand for election as an independent member of parliament.
There are already reports that he might persuade members of the Virtue Party to resign from parliament, in order to give him a chance to re-enter the fray.
Our Correspondent in Ankara, Chris Morris, says the military high command and other staunch secularists may not be pleased with the revised legislation.
The change in the law also raises the standard of evidence needed to close down a political party because of alleged anti-constitutional activities.
It could, in theory, help both the Virtue Party and the pro-Kurdish People's Democracy Party to survive legal challenges against them.
Country profiles
Analysis: A headscarf too far?
(07 May 99 | Europe)
Turkish PM survives two-pronged attack
(22 Mar 99 | Europe)
CIA Factbook - Turkey
Republic of Turkey
Virtue Party
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