South Korea says it has gained consent from the United States to use solid fuel for space launch vehicles.
It has been suggested it could lead to Seoul launching its first surveillance satellites and accumulating technology to build more powerful missiles.
Solid fuel offers greater mobility for missiles and rockets and reduces launch preparation time.
The Americans had imposed strict restrictions on Seoul's use of solid propellant for space launch rockets, with concerns it could be used to produce bigger missiles and cause a regional arms race.
Experts say ballistic missiles and rockets in satellite launches share similar bodies, engines and other technology.
The South Korean government says it has agreed to revise related bilateral missile guidelines with the US in order to lift such restrictions.
Kim Hyun-chong, South Korea's deputy presidential national security adviser, said South Korean research institutes, companies and individuals are now free to develop, produce and possess space launch rockets using solid fuel.
Solid fuel is much cheaper than liquid fuel and is more useful for lifting low-earth orbit satellites.
Mr Kim added South Korea could use solid fuel-based rockets to launch military reconnaissance satellites but the revised agreement still bars South Korea from having a missile with a range of more than 500 miles.
However, he says Seoul can discuss altering that restriction with Washington if that is needed for South Korean national security.
South Korea currently has no spy satellites.
Lee Choon Geun, a missile expert at South Korea’s Science and Technology Policy Institute, said South Korea could use two or three low-earth orbit satellites fired by solid propellant-based rockets to better monitor North Korea.
Mr Lee said the latest deals with the US would also allow South Korea to expand its space development infrastructure and accumulate know-how to manufacture missiles that can fly longer, with bigger payloads.
South Korea's missile capability is inferior to that of rival North Korea.
In 2017, North Korea carried out three intercontinental ballistic missiles tests as part of its efforts to build a nuclear-tipped missile capable of reaching the American mainland.
Last month, North Korea vowed to keep expanding its military capability.
The North also announced it would cut all government and military communication channels with South Korea after it failed to stop activists floating anti-Pyongyang leaflets across the border at the beginning of June.
Cover image: A South Korean test launch at Naro Space Center in 2018 (Picture: Yonhap/PA).