A wide-ranging inquiry into the contaminated blood scandal which has left 2,400 people dead is to be launched.
The Government said the probe was needed to get to the bottom of an "appalling injustice".
The scandal involved haemophiliacs and other patients being infected with hepatitis C and HIV from blood products during the 1970s and 1980s.
The UK imported supplies of the clotting agent Factor VIII from the US, some of which turned out to be infected and much of the plasma used to make the product came from donors like prison inmates in the US, who sold their blood.
Prime Minister Theresa May said that "unimaginable hardship" had been caused by the scandal.
Mrs May's spokesman told a Westminster briefing: "It is a tragedy that has caused unimaginable hardship and pain for all those affected and a full inquiry to establish the truth of what happened is the right course of action to take.
"Consultation will now take place with those affected to decide exactly what form the inquiry will take, such as a Hillsborough-style independent panel or a judge-led statutory inquiry."
Greater Manchester mayor and former health secretary Andy Burnham has repeatedly called for a Hillsborough-style probe into what happened.
Mr Burnham claimed in the Commons that a "criminal cover-up on an industrial scale" had taken place.
Among allegations raised by Mr Burnham was the case of Ken Bullock, who died in 1998, and whose widow said his diagnosis of hepatitis had been changed to being a clinical alcoholic in 1983.
The moderate drinker was possibly refused a liver transplant based on his falsified medical records saying he was an alcoholic, Mr Burnham said.
It had also been suggested that the withholding of results led to infections being passed on to people living with the victims, the former minister said.
Responding to news of the inquiry, Mr Burnham said: "This is a major breakthrough and a vindication of all those people who have campaigned bravely throughout the decades, often in the wilderness.
"But this day has taken far too long in coming.
"People have suffered enough through contaminated blood.
"They have been let down by all political parties and public bodies.
"It is now incumbent on those organisations to work together to give the families truth, justice and accountability without any further delay or obstruction.
"It is essential that this inquiry looks at both the original negligence and the widespread cover-up that followed.
"It is also crucial that organisations representing victims are fully consulted on the form, membership and structure of the inquiry.
"Just as with Hillsborough, there must be a 'families first' approach at all times."
Labour leader Jeremy Corbyn welcomed the announcement of the inquiry, which he said should have the potential to trigger prosecutions.
"It was obviously a serious systemic failure.
"I think we need the strongest possible inquiry that can if necessary lead to prosecution actions as a result, but above all get to the bottom of it.
"A broad, public, inquisitive inquiry is very important."
The Government move comes after the leaders of six political parties, including Mr Corbyn, signed a letter calling for a public inquiry into the scandal.
Carol Grayson, 57, from Jesmond in Newcastle, lost her haemophiliac husband Peter Longstaff in 2005 after he contracted HIV and hepatitis C from contaminated blood.
She said her husband would have been pleased with an inquiry but would have urged caution.
"I don't believe it will apportion blame. Alongside this inquiry, there needs to be a complete police investigation.
"I also want the inquest into my husband's death to be re-opened. It was left as an open verdict."
Mr Longstaff's brother Stephen, also a haemophiliac, died of Aids caused by infected plasma.