NHS medical staff with HIV, including surgeons and dentists, will now be allowed to carry out certain procedures on patients, which the government said will challenge perceptions about the disease as a "death sentence".
England's chief medical officer, Professor Dame Sally Davies, said science had moved on and it was time to scrap "outdated rules".
She said better treatment meant HIV was often a chronic condition that could be managed, with people living long and normal lives.
"We've got outdated rules," Professor Davies said, comparing the chances of being infected with HIV by a medic to being struck by lightning. There have been four cases worldwide of health workers infecting patients, with no cases in the UK.
"Many of the UK's HIV policies were designed to combat the perceived threat at the height of HIV concerns in the 1980s and have now been left behind by scientific advances and effective treatments.
"It is time we changed these outdated rules which are sometimes counter-productive and limit people's choices on how to get tested or treated early for HIV.
"What we need is a simpler system that continues to protect the public through encouraging people to get tested for HIV as early as possible and that does not hold back some of our best healthcare workers because of a risk that is more remote than being struck by lightning."
Prof Davies pointed to "impressive data" and said she worried the public "had not caught up with the reality of HIV treatment".
"At the moment we bar totally safe healthcare workers who are on treatment with HIV from performing many surgical treatments, and that includes dentists.
"But it's a science issue. Society needs to move from thinking about HIV as positive or negative and thinking about HIV as a death sentence, to thinking about whether they're infectious or not infectious."
She said that with effective treatment "people are leading lives that are normal in quality and length".
"With effective treatment, they are not infectious," she added.
About 100,000 people in the UK are living with HIV, although experts say a quarter of those who are infected do not know they have it. Around half of HIV infections are currently discovered late, which can make them difficult to treat.
In 2011, there were around 6,000 new diagnoses of HIV in the UK.
Under the new rules, healthcare workers with HIV will be allowed to undertake all procedures if they are on effective combination anti-retroviral drug therapy.
They must also have an undetectable viral load of HIV in their system, and must be regularly monitored.
The Government predicts that patients will have more chance of being struck by lightning than being infected with HIV by a health worker.
NHS workers are tested for HIV at the start of their career. Anyone going into a job that could expose patients to potential risk is also tested.
Staff are obliged under professional codes of conduct to have a further test if they think they may have been exposed to HIV. But this is not legally enforced.
Under the changes, health workers will be monitored every three months by the person treating them and by occupational health professionals.
Around 110 staff currently working in the NHS, including doctors and midwives, are covered by the current regulations, Prof Davies said.
Public Health England will set up a confidential register holding data on infected workers, including on their viral load and treatment.
"The risk is absolutely negligible, we are talking about people being treated so they are not infectious," Prof Davies said.
Deborah Jack, chief executive of the National Aids Trust, welcomed the new policy for being "based on up-to-date scientific evidence and not on fear, stigma or outdated information".
She added: "Allowing healthcare workers living with HIV to undertake exposure-prone procedures corrects the current guidance which offers no more protection for the general public but keeps qualified and skilled people from working in the career they had spent many years training for."
British Dental Association scientific adviser Professor Damien Walmsley said the change in policy brought the UK in line with many other countries.
"Dentists in the UK comply with rigorous infection control procedures to protect both patients and the dental team against the risk of transmission of blood-borne infections," he added.
Sir Nick Partridge, chief executive at Terrence Higgins Trust, said: "Advances in medication have transformed what it means to live with HIV, and it's great to see regulations starting to catch up.
"People diagnosed in good time can have full, healthy lives, and effective treatment dramatically reduces the risk of the virus being passed on.
"So long as the right safeguards are in place, there is now no reason why a dentist or a midwife with HIV should be barred from treating patients, or why people who would prefer to test at home should be denied that chance.
"Legislation plays a vital role in shaping attitudes. We hope these changes continue to improve public understanding of HIV and support for those living with the virus."
Self-testing kits for HIV will also be legalised in the UK from April 2014, with the aim of improving early detection of the disease.