Announcing this last night, Prime Minister Tony Blair said the immigration rules would be changed for this. This follows a long campaign by several rights groups and a year-and-a-half long Whitehall review.
"The Gurkhas have served this country with great skill, courage and dignity during some of the most testing times in our history. They have made an enormous contribution not just to our armed forces but to the life of this country, and it is important their commitment and sacrifice is recognized," said Blair.
Under the new proposal, all Gurkhas discharged after four years or more years of service would be automatically eligible for citizenship. However, this applies only to Gurkhas discharged after July 1, 1997, when the Gurkha brigade headquarters was moved to the UK.
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According to the Home Office, about 230 Gurkhas are discharged or retire annually, and if all of them sought to come to the UK with their families, around 6,000 people could be eligible for retrospective clearance. The scheme would apply to a further 1,000 Gurkhas and their families every year.
Renowned for their bravery, Gurkhas have fought in nearly every battle and conflict since the Second World War.
"This is extremely good news. But it is not a 100 per cent celebration because of the cut-off date," Major Tikendradal Dewan, the chairman of the Brigade of Gurkhas Welfare Society, was quoted as saying.
"It's difficult to rejoice at the news when we know that something like a quarter of the guys will not benefit from it. What will happen to them? Will they be deported?" he wondered.
Alleged intimidation of Gurkhas upsets Britain
"I am pleased and grateful that so much progress has been made but I am very disappointed by the cut-off, which I think will be challenged,' Tory MP Ann Widdecombe who has been to the forefront of the campaign, was quoted as saying.
"I do not see the moral case for saying that a Gurkha discharged in 1996 after 15 years, during which he may have seen active service, is any less entitled to come here than one discharged a year later."
She also called for end to the rule that Gurkhas could only be joined by their families for three years out of 15 years service. "No British soldier is asked to undergo that," she said. "It seems absolutely extraordinary."
The Home Office said there are nearly 400 Gurkhas resident in the country, of whom 100 were discharged before July 1997.
But while the change in the immigration rules would not apply to them, there were other options - such as work permits - available to them to get into the country, officials were quoted as saying.
"We have put together the best possible package to enable discharged Gurkhas to apply for settlement and citizenship. I hope that the decision will make our gratitude clear," said Home Secretary David Blunkett.
