"Giving blood is an act of generosity, of civic responsibility, and the donor's sexual orientation cannot be a condition," minister Marisol Touraine announced in Paris.
"While respecting patient safety, today we are lifting a taboo," she said.
Touraine said the lifting of the ban, promised by François Hollande in his presidential campaign, will happen piecemeal, starting next year.
Anthony Roux, vice-president of SOS Homophobia told The Local the announcement was a "significant step forward" in the battle against homophobia in France.
"This is positive for French society," he said. "When you have part of the population excluded from being able to fulfill a civic duty like giving blood, then it implies a certain amount of homophobia."
At first, donation will be open to gay men who had not been sexually active for the preceding 12 months, she specified.
The issue in France was reinvestigated thanks to a push from Touraine in April as part of a health reform package.
Previously, men in France who acknowledged in a mandatory pre-donation interview ever having sex with another man were automatically and permanently banned from giving blood.
The ban stemmed from a 1983 law based on statistics that showed there was a prevalence of the HIV virus among homosexuals and the fact that the virus is not always picked up if blood tests take place immediately after transmission.