Dr Mo Mowlam has announced the return of land belonging to Crossmaglen Rangers GAA club "as soon as practicable" as part of the "normalisation" process.
The land, which was taken over by the British army in 1974 and has been used as a helicopter landing pad, has been a source of great friction between the army and the club as well as nationalist politicians in the Border area of south Armagh and GAA supporters throughout Ireland.
The Northern Ireland Secretary said she had taken the decision after security chiefs reviewed the level of threat from republican paramilitaries. "This is a further example of the normalisation steps which we have been able to take in the light of the threat level. I know the requisitioning has been the source of controversy for some time and I am glad that this decision will enable us to resolve the matter."
The decision was welcomed by the Government, which had repeatedly tried to persuade the North's authorities to scale down the British army presence in Crossmaglen. The Taoiseach, who had raised the matter with Mr Tony Blair at Hillsborough last week, expressed his "delight".
Nationalist politicians in the North were also positive. Mr John Fee, an SDLP Assembly member for Newry and Armagh, said it had come at a vital time for the peace process. "I think it is an indication that the British government themselves are willing to take the lead in trying to move the whole process of normalisation forward."
Mr Joe Kearnan, manager of Crossmaglen Rangers, said players and staff were very happy at the news. "Crossmaglen has always been known for the wrong reasons. Thanks to the media coverage over the last two or three years, we have been seeing our small town at last portrayed in the true way. We are a town of great sportsmen playing at the highest level and that is how we should be portrayed."
The DUP Assembly member for Newry and Armagh, Mr Paul Berry, has meanwhile criticised the decision and called for security measures in the area to be stepped up rather than scaled down.