The new rules, which will not apply to the judiciary or the military, were published in the Official Gazette and take immediate effect in the majority Muslim nation.
The ban, whose roots date back almost 90 years to the early days of the Turkish Republic, has kept many women from joining the public workforce.
Prime Minister Erdoğan campaigned in his victorious 2007 campaign with a promise of lifting the longstanding ban on headscarves in public institutions.
On February 7, 2008, the Turkish Parliament passed an amendment to the constitution, allowing women to wear the headscarf in Turkish universities, arguing that many women would not seek an education if they could not wear the head scarf.
However in June 2008, the Constitutional Court annulled the parliament's proposed amendment.
"A regulation that formally intervened in freedom of clothing and lifestyle - a source of inequality, discrimination and injustice among our people - has become history," Deputy Prime Minister Bekir Bozdag said on his Twitter account.
Erdogan's supporters applaud his support to ease secular restrictions and say he is redressing the balance and restoring freedom of religious expression to a Muslim majority.
SHI/SHI