Fifa has agreed that the England, Scotland and Wales teams can wear poppies on black armbands during the upcoming internationals.
The move came after Prince William and Prime Minister David Cameron wrote to Fifa asking that England be allowed to wear shirts embroidered with poppies.
Fifa bans political, religious or commercial messages on shirts.
England and Wales have agreed to the compromise. Scotland will consult their opponents before making a decision.
England will wear the armbands in Saturday's friendly against Spain.
"The FA welcomes Fifa's decision and thanks them for agreeing to this," the Football Association said in a statement.
The Football Association of Wales confirmed its players will wear the armbands for their match with Norway on Saturday.
Scottish Football Association chief executive Stewart Regan said they hoped to adopt the same approach for the friendly against Cyprus in Larnaca on Friday night.
Regan said: "The decision is a pragmatic solution to the fact that Fifa's rules forbid the wearing of the poppy on the match shirt.
"Subject to the approval of the Cypriot FA as the host nation we will also adopt this approach in our friendly match on Friday night.
"We believe this is a fitting way to show our respect for those members of the armed forces who have lost their lives fighting for their country."
The Fifa announcement of the compromise came shortly after it was revealed that the Duke of Cambridge had written a letter to world football's governing body in his position as president of the FA.
Clarence House said the Prince was "dismayed" by Fifa's initial stance ahead of Saturday's England match against Spain.
Earlier on Wednesday, Mr Cameron said he would also write to Fifa asking it to lift the ban ahead of England's game with the world champions.
"It seems outrageous," said Mr Cameron. "I hope Fifa will reconsider."
A spokesman for St James's Palace said the Prince was pleased with the compromise.
A Downing Street spokesman said Mr Cameron welcomed Fifa's decision, saying: "It's a sensible way forward."
As an alternative to having embroidered poppies on their shirts, the FA had previously said England players would wear black armbands during the game and lay a wreath on the pitch during the national anthems.
England and Wales' rugby league players will be wearing poppies on their shirts this weekend, along with the other two teams - Australia and New Zealand - involved in the Four Nations.