Northern Ireland Deputy First Minister and ex-IRA commander Martin McGuinness will be a special guest of the Queen during a state banquet at Windsor Castle, it has been confirmed.
The Irish Taoiseach Enda Kenny welcomed the decision, saying that people had to "move on and not be blocked by the past".
Sinn Fein politician McGuinness will attend other events organised by the monarch in London during the historic official visit by Irish president Michael D Higgins to the UK next week.
The former MP, who refused to sit in the House of Commons because of an oath of allegiance to the Queen, had snubbed the gala banquet in her honour at Dublin Castle during a ground-breaking trip to the Irish Republic in 2011.
But in a statement, Sinn Fein leader Gerry Adams confirmed McGuinness would be visiting Windsor Castle and other official events in London during the four-day state visit beginning on Tuesday.
"While Martin McGuinness's involvement in President Higgins's state visit may not be welcome by opponents of change, it is yet another example of Sinn Fein's commitment to an inclusive future based on tolerance and equality," he said.
"This decision may cause difficulty for some Irish republicans in light of ongoing difficulties in the north (of Ireland) but I would appeal to them to view this positively in the context of republican and democratic objectives and the interests of unity and peace on this island."
Kenny, speaking to the BBC's Andrew Marr, said he "didn't see why (McGuinness) shouldn't attend".
He said: "This is all part of the building of relationships between the two countries and peoples on both side of a divide.
"He's an elected member of the executive services, Deputy First Minister - we've got to move on and not be blocked by the past."
A Buckingham Palace spokesman said: "There is a long-standing practice of not commenting on individual invitations. That said, Her Majesty is greatly looking forward to this historic state visit and welcoming all guests to Windsor Castle."
The Queen met and shook hands with McGuinness in Belfast two years ago, in what was seen as another step forward in Anglo-Irish relations.
The gesture that would have been unthinkable just years earlier was also a momentous landmark in the peace process.
Adams said next week's state visit by the Irish president needed to be viewed against the backdrop of huge political changes over recent years.
"Sinn Fein seeks a new and positive relationship between Ireland - all of Ireland - and Britain based on equality and mutual respect for the first time in our troubled history," he said.
"We also seek an agreed, united Ireland which accommodates those who define themselves as British.
"It is within this context that I can confirm that Deputy First Minister Martin McGuinness will accept an invitation to attend all events as part of the state visit."
The Queen is said to have taken a keen interest in the preparations for next week's events - the first time an Irish head of state has been formally invited to the UK by a British sovereign.
Conservative MP Andrew Rosindell, member of the Foreign Affairs Select Committee, said: "Whilst the man concerned has engaged in things in the past which have created appalling mayhem and tragedy, today we are looking at healing those rifts.
"I would feel very uncomfortable sitting beside him at dinner. I would have great difficulty doing that myself, but in terms of building a democratic foundation in Northern Ireland, I can understand why people feel this is what we need to do.
"But would I want to sit beside him at dinner? No, I certainly would not."
The highly successful state visit to Ireland by the Queen and the Duke of Edinburgh in May 2011 paved the way for the latest milestone.
In remarkable scenes, the Queen paid her respects to republican dead at Dublin's Garden of Remembrance, visited Croke Park - site of the 1920 Bloody Sunday massacre - and made a widely praised speech on Anglo-Irish history at Dublin Castle.
Since then, a number of meetings between Higgins - a former Labour government minister, a poet and academic - and members of the Royal Family have taken place.
Although the Irish head of state has travelled to events in London, Manchester, Liverpool and Scotland last year, these were not official visits.
Likewise, previous meetings between the Queen and then-president Mary McAleese and her predecessor Mary Robinson at various functions in the UK were not official state visits.
Highlights of the visit will include an address the president will make to both Houses of Parliament - another first for an Irish head of state.
The Queen will stage a traditional state banquet in honour of her guest at Windsor Castle, Higgins and his wife Sabina will visit the Royal Shakespeare Company in Stratford-upon-Avon and he will attend another major dinner at the Guildhall in the City given by the Lord Mayor.
Northern Ireland will be recognised with the Queen hosting a reception for leading figures from Ulster's cultural, political and business life.
Kenny raised the prospect of a royal visit to Ireland at the time of the centenary of the 1916 Easter Rising, when nationalists in Dublin staged a revolt against British rule.
The Taoiseach told the BBC's Andrew Marr Show: "It should be possible for members of the royal family to visit Dublin during those centenary commemoration ceremonies in 2016. It would be another event in the continuing closeness and closer relationship between both our countries."
Kenny said: "We've got to move on and not be blocked by the past. The Queen herself spoke in Dublin Castle, which was the symbolic head of the British Empire in this country for several hundred years.
"She said if you looked at history, there were some things you might do differently and some things you might not do at all, and her contribution in Dublin three years ago closed a circle of history."
Kenny denied that he had allowed an atmosphere of greater extremism to develop in Northern Ireland by failing to focus Dublin's attention on affairs north of the border.
"I disagree with that completely," he said.
"There are more meetings being held between ministers and officials in various agencies on either side of the border than ever before.
"We contribute very constructively to issues in Northern Ireland in terms of infrastructure, education, health, cross-border activities. These things are at an all-time high level and we want that to continue."