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Theresa May has scrapped the £65 fee millions of EU citizens were going to have to pay to secure the right to continue living in the UK after Brexit.
It came as the prime minister makes a statement to MPs on how she plans to get them to back her Brexit deal.
She said she would have further discussions with Northern Ireland's DUP and others on their concerns about the Irish backstop.
She will then "take the conclusions of these discussions back to the EU".
MPs are due to vote on any proposal next Tuesday, after the PM's original plan was defeated last Tuesday by a record-breaking 230 votes in the House of Commons.
Millions of EU citizens living in the UK will have to apply for "settled status" to remain in Britain after Brexit.
Applicants must have lived in the UK for five years and had been expected to pay a fee of £65 each.
"Settled status" gives EU citizens the same access to health care and education after Britain leaves the EU.
Mrs May told MPs she had listened to the concerns of EU citizens, through their campaign group the 3million, about the fees and they would be waived when the scheme is launched on 30 March.
The government has launched a pilot scheme this week for people to apply for leave to remain, through a smartphone app.
Mrs May said anyone "who has, or will, apply during the pilot phase" will have their fee reimbursed, with further detail to be announced shortly.
The move was welcomed by Labour leader Jeremy Corbyn.
