The military is the last Turkish institution to see the ban removed. It has long been seen as the guardian of Turkey's secular constitution.
Wearing headscarves in public institutions was banned in the 1980s.
But Turkey's Islamist-leaning President, Recep Tayyip Erdogan, argues that the ban is an illiberal vestige of the past.
The issue has been controversial in Turkey for many years.
Secularists regard the headscarf as a symbol of religious conservatism and have accused President Erdogan of pushing an Islamist agenda, converting many public schools into religious ones as part of his pledge to raise "a pious generation".
Over the past decade the ban has been removed for schools, universities, the civil service and in August for the police.
The BBC's Mark Lowen, in Istanbul, says the secular side of Turkey now feels largely ostracised, accusing Mr Erdogan of governing just for his conservative, religious support base.
The conservatives respond that they were long seen as second-class citizens and the headscarf is an expression of individual liberties.
Our correspondent says that Turkey's religious-secular divide is as old as the republic itself, but is now arguably deeper than ever.
The fall and rise of the headscarf
- In 2010, Turkey's universities abandoned an official ban on Muslim headscarves
- Three years later, women were allowed to wear headscarves in state institutions - with the exception of the judiciary, military and police. That year, four MPs wore headscarves in parliament
- A ban on policewomen wearing the Islamic headscarf was lifted in 2016
The new rules apply to regular women military officers, non-commissioned officers and female cadets. They will be allowed to wear a headscarf under their caps or berets as long as they are the same colour as their uniforms and are not patterned, Hurriyet Daily News reported.
The military's opposition to the government's move has been weakened after President Erdogan's supporters increased their authority over the armed forces following the failed 15 July coup last year.
The changes will come into effect once they are published in the official gazette.
Turkey has had a secular constitution with no state religion since 1920.
Most people in Turkey are Sunni Muslims.