The Government will bring forward legislation to abolish the so-called "tampon tax" next week after Tory MPs threatened to stage a Commons revolt.
Chancellor George Osborne announced the move as he hailed a "common sense" agreement to loosen EU rules on VAT levels.
In an apparent bid to head off a separate rebellion, the Treasury has also insisted the levy on solar panels and energy saving measures will not be raised.
David Cameron highlighted the issue of VAT on sanitary products with fellow leaders at a Brussels summit, and secured a statement that the European Commission will bring forward proposals allowing "flexibility" in the rates applied to different products.
But ministers have decided they need to act before the looser rules are formally implemented. A number of Conservative MPs had threatened to vote for an amendment to the Finance Bill next week to allow the zero-rating of women's sanitary products.
The parliamentary tactic was in part driven by a determination by pro-Brexit MPs to embarrass the Government over the role of the EU in setting VAT.
The current 5% rating on sanitary products is the lowest permissible under EU laws, though exemptions are allowed for countries - like Ireland - which had a 0% levy at the time of their entry into the EU.
Mr Osborne said: "We've used our seat at the top table in Europe to secure what the British public has demanded – common sense on VAT and an end to the tampon tax.
"I said last year we were committed to getting the EU rules changed, and until that happened we would use the money raised to fund women's health and support charities.
"That means £17 million for good causes – and now we're acting to ensure that women see the difference at the till."
Eurosceptic Conservative MPs have also lined up to back a Labour move to block EU-ordered tax hikes on solar panels and energy saving measures.
A dozen Tories, including former cabinet minister Peter Lilley, former deputy speaker Nigel Evans, 1922 Committee chairman Graham Brady and select committee chairman Bernard Jenkin, have signed up to an amendment aimed at preventing VAT on the items rising from 5% to 20%.
Mr Osborne had been expected to increase the levy after the European Court of Justice ruled the UK's lower rates were illegal under European Union law.
But Treasury aides said the "installation of all energy saving materials including solar panels, wind turbines and water turbines will also continue to benefit from the current, reduced rates of VAT".
Speaking at the conclusion of the European Council summit, Mr Cameron said his success in securing progress on the "tampon tax" was an example of how the UK could exert influence within the EU.
The Prime Minister said: "We have some EU-wide VAT rules in order to make the single market work. But on this specific issue of VAT on sanitary products, we've been pressing the European Commission for several months to bring forward proposals so we can apply a zero rate.
"I've secured clear Council conclusions for this and that's exactly what they will do, with proposals coming in the next few days.
"What's more, I've secured backing from all other European leaders for this plan, so we are now a step closer to stopping this tampon tax once and for all.
"It shows that when we fight for our interests here, we are heard and we can get things done. We can reform the EU and make it work for Britain, and at this summit we've shown that once again. I believe that Britain will be stronger, safer and better off in a reformed EU."