Housing, disability and children's charities are celebrating after Welsh social justice and regeneration minister Edwina Hart announced the decision as part of a package of measures for families with disabled children.
It leaves England as the only part of the UK where the grant is means tested. Campaigners said ministers would now have to acknowledge that the means test was unfair and outdated.
Brendan McKeever, co-chair of Homes Fit For Children, said: "It puts the English government in an embarrassing situation. Parents of disabled children in England should be livid."
The Office of the Deputy Prime Minister (ODPM) is currently reviewing the means test in England and is expected to make a decision on whether to retain the current arrangements. The ODPM has previously said that a change in Welsh policy would be unlikely to influence its review (Children Now, 16-22 March).
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