The British government has been defeated in the House of Commons on its policy of restricting the right of many former Gurkhas to settle in the UK.
MPs voted by 267 - 246 for a motion by the Liberal Democrat party offering all Gurkhas equal right of residence. The opposition Conservatives and 27 Labour MPs backed it.
Immigration minister Phil Woolas told the House new proposals would be published before Parliament's summer recess.
In a statement, he said: "This government respects the will of the House of Commons."
He added that all outstanding applications for UK residence by Gurkhas would be dealt with by the end of May.
The BBC reports some 36,000 former Gurkhas have been denied UK residency because they served in the British army before 1997.
Ministers recently introduced new rules allowing more soldiers to settle in the UK based on long service, medals received, and those injured in battle.
The Home Office said that new rules would allow about 4300 more to settle, but the Gurkha Justice Campaign said it would be only 100.