Immigration minister Liam Byrne said Tul Bahadur Pun - who single-handedly stormed Japanese machine-gun positions during the Second World War - deserved to be honoured for his services to Britain.

"The circumstances surrounding Tul Bahadur Pun's case are clearly exceptional and in light of this Home Secretary John Reid and I have reviewed the case and made the decision to grant Mr Pun a settlement visa immediately," he said.

"This decision was not taken lightly and reflects the extraordinary nature of this case, in particular Mr Pun's heroic record in service of Britain which saw him awarded the Victoria Cross. It is entirely right that this record should not only be recognised but honoured."

He added: "There has always been scope to grant settlement in the UK to ex-Gurkhas who have retired before July 1997, and who do not meet the requirements in the immigration rules. As on this occasion, discretion may be exercised on a case by case basis. We have also taken into consideration his current medical condition."

The 84-year-old's actions on June 23, 1943 won him royal admirers - he was invited to the Queen's Coronation and had tea with the Queen Mother.

The Home Office originally declined him a settlement visa, telling him: "You have failed to demonstrate that you have strong ties with the UK."

Mr Pun, who receives a £130-a-month Army pension, wants to move from Nepal because of his failing health. He currently has to carry out a whole day's journey to a Gurkha camp to collect his pension every month, being carried in a basket by several men.

Mr Pun earned his VC - the highest honour for valour in the face of the enemy awarded in the British and Commonwealth armed forces - in Burma after almost all his comrades were wiped out. He seized a Bren Gun and ignored Japanese fire to storm machine gun positions.

His official citation read: "His outstanding courage and superb gallantry in the face of odds which meant almost certain death were most inspiring and beyond praise."