Rotherham council is to have its power to grant taxi licences reinstated, a responsibility investigators found had contributed to child sexual exploitation in the town.
Licensing powers are the latest to be handed back to the local authority, since it was stripped of a series of its functions last year in the wake of the child abuse scandal.
The council's licensing powers cover driving and operations licences for hackney carriage and private hire taxis, as well as things like alcohol licences.
In a ministerial statement, Local Government Minister Marcus Jones said: "This marks significant progress, as licensing was one of the council's services implicated by the Casey report as contributing to child sexual exploitation in Rotherham.
"I am now satisfied that the council could exercise the licensing function in compliance with its best value duty and I am consulting on revising directions accordingly."
Taxi drivers have had a "prominent role" in child sexual exploitation across England, including in Rotherham, according to the 2014 report by Professor Alexis Jay which examined abuse in the town during a 16-year period.
A previous report by the Communities and Local Government Committee of MPs noted the concerns raised relate to a "very small minority" of drivers in Rotherham, but they had undermined public confidence.
The most recent reports by commissioners appointed to oversee services in Rotherham had found that licensing services were now ready to return to council control, Mr Jones said.
He added: "The collective evidence demonstrates that the key objectives of the intervention, in relation to licensing, have been delivered.
"It is my assessment that the weaknesses in licensing identified in the Casey report have been addressed and the service is now functioning effectively.
"Officers and members have recognised the need for and implemented fundamental cultural change, and advisory board members, in particular the chair, are more capable and confident in their role."
Commissioners will continue to have oversight of the service, Mr Jones added.
Education, housing and planning functions were returned to the council in February.