Stories of the harsh treatment meted out to British visitors who stayed beyond the 90 days allowed without a visa had given a "black eye" to America's reputation, said Robert Bonner, who heads the department's customs and border protection bureau.
"The consequences were grossly disproportionate to the minor, technical violations," he told the New York Times. "Typically these individuals were handcuffed during the time they were transported to and from detention. They were treated as criminals."
British visitors to the US, like those from 26 other states including Germany and Japan, can visit the US for 90 days without a visa. In the past when those who had stayed longer than that tried to re-enter the country they were handcuffed, locked up, often overnight, and then sent back.
While the decision affects all 27 countries it appears that news reports in Britain prompted the change as the US believed it was tarnishing its image abroad.
Mr Bonner said: "If the person doesn't pose any threat to us whatsoever we want to find a way to let that person in. We can make judgments and exercise discretion to do something other than deny entry for minor technical violations of the immigration law and still do our priority mission, and that is preventing terrorists from entering the US."
The new policy means previous transgressors will be permitted to enter the country for 90 days despite their history, but have to apply for visas after that.
Officials do not know how many people were detained under the previous policy but conceded it was a significant number.
Earlier this year a British man told of the harsh conditions he was held in after customs officials at New York's Kennedy airport detained him on suspicion of defaulting on a debt in the Middle East.
David Pattison, 52, of Beeston in Norfolk, said he was subjected to "inhumane and degrading" treatment as he was detained with eight others, including two Britons.
The accountant said he was handcuffed and a restraint was placed across his chest by abusive guards. He claimed he was denied food or drink and his angina medication was taken away from him. He denied that he owed money in the Gulf state of Qatar.
In another case Magnus Mulliner, the deputy head of sports and recreation at a college in Southampton, said he was refused entry to the US at JFK in 2002 after immigration officials told him his name was linked to narcotics offences, which he denied.
British embassy officials in Washington yesterday welcomed the move, saying they hoped the decision would "result in a decline in the number of British citizens detained on arrival".