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A cabinet meeting chaired by Prime Minister Imran Khan approved a summary on Tuesday to allow legal production for the first time, the minister Fawad Chaudhry told a news conference in Islamabad.
"We want that this hemp market could give us around $1 billion in the next three years," he said, adding the global market is worth around $25 billion.
The summary seen by Reuters says the ministry sought permission to cultivate industrial hemp after deliberation by the ministries of commerce, narcotics control and national health services.
Hemp seeds produce hemp oil, while the leaf is used in medicine and the stem can be turned into fibre to replace cotton in the textile industry.
Chaudhry said the compound cannabidiol found in the hemp plant has an important role in medical science and therapies to mitigate severe and chronic pain affecting for instance cancer patients or those who have lost limbs.
Across the world, companies have been seeking to tap into the market for medicinal cannabis.
The minister said the cultivation of hemp - a strain of the cannabis plant that contains little or no tetrahydrocannabinol, or THC, the substance that makes people high - will only be allowed under government control and the venture should not be confused with poppy-growing.
Pakistan's northwestern districts along the Afghan border have been home to the illegal cultivation of poppies for opium and heroin and the production of cannabis, supplied to the local narcotics market or smuggled internationally.
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