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The new 'Graduate' route will launch for the 2020/21 intake of students to university.
The two-year post-study work visa was earlier scrapped by then home secretary Theresa May in 2012. The reintroduction of the programme is expected to boost the number of students going to Britain significantly.
The new 'Graduate' route will be open to all international students - including those from India - who have valid UK immigration status as a student and have successfully completed a course of study in any subject at the undergraduate level or above at an approved UK higher education provider.
The visa will allow eligible students to work, or look for work, in any career or position of their choice, for two years after completing their studies.
"The new 'Graduate' route will mean talented international students, whether in science and maths or technology and engineering, can study in the UK and then gain valuable work experience as they go on to build successful careers," home secretary Priti Patel said in a statement.
"This is fantastic news for Indian students, who will now be able to spend more time in the UK after completing their degree, allowing them to gain further skills and experience," said Dominic Asquith, British High Commissioner to India.
Indian students coming to study in the UK reached almost 22,000 in the year ending June 2019.
This was a 42 per cent increase on the previous year - and almost 100 per cent higher than three years ago.
This announcement follows the creation of a new fast-track visa route for scientists and the removal of the limit on PhD students moving into the skilled work visa route, which collectively aim to cement the UK as a science superpower and a world leader in the STEM (Science, Technology, Engineering and Mathematics) sector.
Almost half of all Indian students (almost 130,000 since 2008/9) heading to the UK in the last 10 years chose a STEM subject.
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