Ministers have backed down in a row over paying higher disability benefits to 164,000 people by saying they will not contest a High Court decision.
New Work and Pensions Secretary Esther McVey said the Government would not be appealing December's judgment over payments to people with mental health conditions.
The High Court overruled a controversial rule change by ministers that would have restricted those suffering from psychological distress from claiming higher rates of Personal Independence Payment (PIP).
The Government previously indicated it would appeal the decision, but Ms McVey ruled out fresh legal action in a written statement to Parliament.
She added: "My department will now take all steps necessary to implement the judgment in MH in the best interests of our claimants, working closely with disabled people and key stakeholders over the coming months.
"Although I and my department accept the High Court's judgment, we do not agree with some of the detail contained therein.
"Our intention has always been to deliver the policy intent of the original regulations, as approved by Parliament, and to provide the best support to claimants with mental health conditions."
New DWP secretary of state Esther McVey confirms that the government will not appeal High Court judgment on PIP and claimants with mental health conditions: pic.twitter.com/ToZzAw05zz
-- Child Poverty Action (@CPAGUK) January 19, 2018
The new regulations, introduced in March, prevented an award of the enhanced PIP mobility rate if someone cannot take a familiar journey on their own unless it is "for reasons other than psychological distress".
Campaigners argued that people who suffered from "overwhelming psychological distress" were treated less favourably than people with other conditions when their ability to make journeys was assessed.
The Department for Work and Pensions will now go through all affected cases to identify anyone who may be entitled to more as a result of the judgment.
Ms McVey confirmed that all payments will be backdated to the effective date in each individual claim.
The changes in March overruled the decision of an independent tribunal.
The Government was wrong to bring in the #PIP regulations last year and it was wrong to ignore time and time again the views of the courts. Laboursupported the initial Tribunal judgment and pledged in our manifesto to reversethe PIP regulations. 1/2
-- Debbie Abrahams MP (@Debbie_abrahams) January 19, 2018
At the time ministers said following the tribunal's judgment would affect 164,000 people's benefits and cost £3.7 billion extra by 2022.
"The Government was wrong to bring in the PIP regulations last year and it was wrong to ignore time and time again the views of the courts," said shadow work and pensions secretary Debbie Abrahams.
"Serious questions remain including, how many people have been adversely affected by the Government's reckless decision to oppose the tribunal's original judgment?
"How much public money has been spent on lawyers, trying to defend the indefensible?
"And how quickly will people with severe mental health conditions receive the support to which they are rightly entitled?
"This is yet more evidence of the duplicity and disarray of the Tories' social security policies."
Mark Atkinson, chief executive of disability charity Scope, added: "It's absolutely right that the Government has accepted the High Court's ruling over the 'discriminatory' changes made to PIP last year.
"This announcement is a victory for the many disabled people who have been unable to access support they are entitled to.
"The regulations introduced last March made crude and unfair distinctions between those with physical impairments and mental health conditions."