The UK has granted Huawei a "limited" role in its 5G infrastructure, keeping the Chinese firm away from the core parts of its network, going against advice from the US.
The government said it recognised the risk Huawei presented but concluded that it could mitigate the threat with a range of security measures.
Huawei will be excluded from all safety-related and critical networks and will only be allowed to supply 35% of the hardware which connects devices and equipment to mobile phone masts.
The long-awaited decision has been under increasing pressure from the US with calls for the UK to drop the Chinese firm over fears it would be used for espionage. Donald Trump's government has taken a hardline on Huawei, repeatedly attempting to convince the UK to do the same because it has such a global influence.
Huawei is the biggest provider of 5G equipment and three of the UK biggest telecoms providers already use its equipment in the networks.
Following a meeting with the National Security Council at Downing street, the Culture Secretary Nicky Morgan released a statement on "high-risk" vendors.
"We want world-class connectivity as soon as possible but this must not be at the expense of our national security," Morgan said. "High-risk vendors never have been and never will be in our most sensitive networks.
"The government has reviewed the supply chain for telecoms networks and concluded today it is necessary to have tight restrictions on the presence of high-risk vendors. This is a UK-specific solution for UK-specific reasons and the decision deals with the challenges we face right now."
Speaking on BBC News, former Culture Secretary Jeremy Wright called the decision a "sensible compromise" and said it was feasible to include Huawei in some parts of the network, but not every part.
"I think it is possible to include Huawei, so long as you are sensible, you are cautious and that you are following the advice of the intelligence agencies," he said.
Huawei said it was reassured by the UK government's confirmation that it can continue working with on the country's 5G infrastructure.
"This evidence-based decision will result in a more advanced, more secure and more cost-effective telecoms infrastructure that is fit for the future," said Victor Zhang, Huawei's vice president. "It gives the UK access to world-leading technology and ensures a competitive market.
"We agree a diverse vendor market and fair competition are essential for network reliability and innovation, as well as ensuring consumers have access to the best possible technology."
All eyes will now be on the US government and in particular, the twitter account of President Donald Trump as the UK waits for a response.
