Overseas companies with operations in China and individuals living there can now buy property for their own use, Xinhua said.
The State Council also lowered requirements on registered capital for foreign-funded real estate businesses. Any foreign enterprise in China must show a set amount of capital to prove itself financially viable.
Registered capital for foreign owned real estate companies should now be no less than 40% of total investments between $10 million and $30 million. If the total investment is valued at more than $30mn, the ratio must be over one third, Xinhua said.
The previous ratio was at least 50% for investments valued at more than $10mn, the news agency said.
A requirement that foreign investors should have paid registered capital in full before taking out local loans has been removed, it said.
The changes aim to "boost the smooth and healthy development of China's real estate market", Xinhua said.
Until now, foreign residents have only been allowed to buy one property in mainland China, and only after they have worked in China for a year, China.org.cn said.
Individuals and companies are now allowed to buy as many properties as they want, although they will still be subject to local purchase restrictions. In Shanghai, for example, people without a Shanghai household registration are allowed to buy only one property, China.org.cn said.
Liu Yuan, a Shanghai-based research director for Centaline Group, China’s biggest property agency, told Bloomberg that the change represents "a substantial easing of restrictions on the central government level from the previous tightening. However, the actual impact might be small, as overseas buyers only make a microscopic proportion of China’s housing market."
Non-Chinese homebuyers accounted for 0.5% of existing home transactions in Shanghai last year, Centaline told Bloomberg.
The Chinese property market has changed since the previous rules were put in place, Tao Wei, a property agent with Shanghai Tianyou Property told China.org.uk.
"Before, when foreign capital came into China's domestic property market, housing prices surged to a level that Chinese residents could not afford, and the pace of the housing price rises was so much faster than that of local residents' income," Tao said.