Commuters will be able to use pay-as-you-go Oyster cards on London's entire suburban overland rail network from January, it has been confirmed.
The cards are currently used on Tube, bus, tram, London Overground and Docklands Light Railway services.
Transport Secretary Lord Adonis said it would enable passengers to travel "seamlessly" around London.
London Travelwatch welcomed the move but said passengers will have to ensure they get the cheapest fares possible.
From 2 January, passengers will be able to use pay-as-you-go Oyster cards on all Greater London overland rail services, London Mayor Boris Johnson said.
Each rail operating company will set Oyster fares on its own routes and additional combined rates will be introduced for journeys that incorporate both Transport for London and national rail services.
"In the overwhelming majority of cases, Oyster pay-as-you-go offers the cheapest single rail fare applicable to that particular route," the mayor's spokesman said.
"The only exceptions are holders of certain national railcards for whom cheaper paper tickets for travel on national rail maybe available."
Lord Adonis and Mr Johnson also announced that pay-as-you-go Oyster cards will be accepted on Thames Clipper River services from Monday.
Mr Johnson said: "It has ended the crackers situation of Londoners not being able to use Oyster on every commuter route in the capital."
Lord Adonis said: "If we are to encourage more people on to public transport we must make it as easy and convenient to use as possible.
"That is exactly what Oyster has done in London and why extending pay-as-you-go to rail services is so important."
Sharon Grant, chair of passenger group London Travelwatch, described the move as "a big step towards the integrated transport network London needs and deserves".
"We have been pressing for Oyster to be made available on rail for years, and we are absolutely delighted that the day has finally arrived," she said.
"However, people will need to check to make sure they are getting the cheapest ticket possible, and we hope that there will be enough opportunities for people to purchase and top up their Oyster pay-as-you-go. This has not always been the case in all parts of London."
But Liberal Democrat London Assembly transport spokeswoman Caroline Pidgeon said the move "fell far short of what Londoners deserve".
Oyster users may face higher fares on overland trains than for almost identical journeys on the Tube, she said.
Ms Pidgeon added that Oyster travelcard holders must "top up" the funds on their cards to travel outside their permitted zones.
"Rail travellers face serious hassle each and every time they wish to travel out of the zone covered by their season ticket," she said.