Fifa president Sepp Blatter had previously opposed a GB team
Fifa has given its seal of approval for Britain to enter a united football team at the 2012 Olympics in London.
Scotland, Wales and Northern Ireland have voiced concern that competing as Britain could jeopardise their future as separate international teams.
But Fifa insists it would not have any negative effect, should it go ahead.
The matter, still unresolved, is now in the hands of the four individual football associations, who are expected to report back to Fifa in March.
Though many influential figures want Britain to enter a team, the idea is still to be officially approved and the Scots remain fierce opponents.
Fifa now intends to speak with all four countries to get their thoughts on whether a British team should participate in 2012 and, if the plan were to go ahead, how the team would be composed.
Sepp Blatter, Fifa president, said on Saturday: "The executive committee confirmed that the participation in the 2012 London Olympic Games of a single team representing Great Britain would not affect the existing individual status of the four British football associations.
For the Olympic Games, they have to play in one entity. The ball is now in their turf
Fifa president Sepp Blatter
"We have no problem with that because four British associations are identified in Fifa statutes as being four different entities.
"And, now for the Olympic Games, they have to play in one entity. The ball is now in their turf.
"We expect a solution that will be presented to us for the month of March."
Scottish Secretary Jim Murphy hopes Fifa's confirmation will pave the way to Scottish footballers taking part in 2012.
"My priority has always been to ensure the future of Scotland's national team is not affected if there was to be a one-off under-23 tournament at the Olympics," he said.
"I would like to see young Scots going for gold at the Olympics.
"Today's announcement means that Scotland can have the best of both worlds with our own national team safe and protected - and the best of our young players playing in a one-off under-23 Olympic tournament which will see games played at Hampden."
British prime minister Gordon Brown - himself a Scot - has spoken to Manchester United manager Sir Alex Ferguson about leading a potential team and is urging the four home nations to get together to discuss the idea in the belief that differences can be solved.
"I think there is a way round this problem and that can be found if people can get round the table and discuss it," he said on Friday.
"There's a number of suggestions been made and I think that, over time, people in Scotland, Wales and Northern Ireland will see the benefits of this unique sporting event that's coming to London."
Scottish National Party MP Pete Wishart had responded to Brown's comments by again accusing the prime minister of endangering the future of Scotland's national team.
Fronted by former Scotland manager Craig Brown, a 'No To Team GB' campaign has been launched to stress that any guarantees from Fifa are meaningless because rulings can be overturned because it is a democratic organisation governing by the votes of its members.
Uefa general secretary David Taylor, the former SFA chief executive, also recently warned against a united British team at the Olympics.
Current England coach Fabio Capello, whose contract expires in 2012, has also previously admitted it was his "dream" to manage the side.
By 2012, it will be 52 years since a British football team has participated in the Olympics.