Moves by gas company Cuadrilla to exploit the unconventional gas in Lancashire were put on hold 18 months ago after fracking, which uses high-pressure liquid to split rock and extract gas, caused two small earthquakes.
UK Energy Secretary Ed Davey said today that fracking could resume in the UK, subject to new controls which aim to reduce the risk of seismic activity.
Scotland, which is rich in methane gas because of its coal reserves, could take advantage of fracking-type technology.
But local communities are already protesting about plans to extract methane from coalbeds under areas near Falkirk and Stirling, with concerns over the risk of gas explosions to nearby railways and houses.
Scottish environmental watchdogs in Scotland have also warned that "fracking" for gas could bring radioactive waste to the surface.
At Westminster, Mr Davey said shale gas represented a promising new potential energy resource for the UK, although it was not yet known what contribution it could make to the energy mix, jobs and the economy.
He insisted that exploiting shale gas in this country would not undermine efforts to cut emissions to tackle climate change.
And he said that, as gas would be needed in coming decades for heating, cooking and electricity, there were advantages in developing domestic supplies.
The Treasury has already signalled its support for the budding industry, proposing tax relief for shale gas, and unveiling a gas generation strategy which potentially paves the way for a new "dash for gas".
But environmentalists warn that a continued reliance on gas would prevent the UK meeting targets to cut emissions and tackle climate change, and that shale has no place in the move to a low-carbon economy.
Concerns have also been raised, following widespread exploitation of shale resources in the US, that it can cause local environmental problems including polluting water supplies and damaging development.
Mr Davey said: "Shale gas represents a promising new potential energy resource for the UK. It could contribute significantly to our energy security, reducing our reliance on imported gas, as we move to a low-carbon economy.
"We are still in the very early stages of shale gas exploration in the UK and it is likely to develop slowly.
"It is essential that its development should not come at the expense of local communities or the environment. Fracking must be safe and the public must be confident that it is safe.
"We are strengthening the stringent regime already in place with new controls around seismic risks. And, as the industry develops, we will remain vigilant to all emerging evidence to ensure fracking is safe and the local environment is protected."
The controls will include a traffic light system, requiring operators to stop if seismic activity reaches a certain level, magnitude 0.5, which is well below a quake that could be felt at the surface but higher than normal fracking levels.
Tessa Munt, Liberal Democrat MP for Wells, called for investment in renewable energy.
"The fracking debate is fundamental to the direction of UK energy policy," she said.
"Do we, as a country, want to scramble around trying to drag every last remnant of polluting fossil fuels from our earth before we understand fully the impact of this highly controversial technique?
"Or do we want to be serious about reducing our energy demand, improving the energy efficiency of our buildings, vehicles and equipment and embracing renewable energy, with its absolute energy security, declining costs, many new jobs and real growth?
"Even as a small part of the energy mix, a push for shale gas will swiftly descend into a commercial stampede and investment will leak away from the renewable sector.
"There is an alternative, it is better for our country, our beautiful county, our communities and our children.
"I know where I stand."
Greenpeace energy campaigner Leila Deen said: "George Osborne's dream of building Dallas in Lancashire is dangerous fantasy. He is not JR Ewing and this is not the US.
"Energy analysts agree the UK cannot replicate the American experience of fracking, and that shale gas will do little or nothing to lower bills.
"Pinning the UK's energy hopes on an unsubstantiated, polluting fuel is a massive gamble and consumers and the climate will end up paying the price."
The go-ahead for fracking to resume came as the Government's climate advisers warned that a continued reliance on gas would push up consumer bills by hundreds of pounds more than if there was a shift towards low-carbon power such as wind.
The Committee on Climate Change's chief executive, David Kennedy, dismissed claims that exploiting shale gas in the UK and Europe could push down gas prices.
He said it was not a "game changer" on this side of the Atlantic as it could only meet a relatively small share of gas demand.
Cuadrilla is currently the only company which has started exploration of shale gas resources in the UK. It says reserves in Lancashire could supply a quarter of the UK gas demand in the future.
And it claims emissions from domestic shale gas, managed properly, could be 10% lower than liquefied natural gas (LNG) imported from Qatar, or piped from Russia.
Cuadrilla Resources' chief executive Francis Egan said: "Today's news is a turning point for the country's energy future.
"Shale gas has the potential to create jobs, generate tax revenues, reduce our reliance on imported gas, and improve our balance of payments.
"Our exploration has shown that under Lancashire there is a belt of gas-filled shale over one mile thick.
"Today's decision will allow continued exploration and testing of the UK's very significant shale resources in a way that fulfils the highest environmental and community standards."
The company had drilled three exploration wells and had begun fracking and testing gas flows from one of them when the tremors were detected and fracking was suspended last year. They are in the process of drilling a fourth well.
Now that the go-ahead for fracking has been given in the UK, Cuadrilla must obtain new planning permissions, environmental permits and consent from the Department of Energy and Climate Change for further fracking.
But the company hopes to have initial data on how much gas it might be able to extract by the middle of next year.
Today's decision also paves the way for potential exploration of shale reserves elsewhere in the UK.
Other areas where fracking for shale has been mooted include near Balcombe, West Sussex, where concerns have been voiced about pollution of water supplies, and in the Mendips, raising fears it could affect the world famous hot springs at Bath.
Friends of the Earth Executive Director Andy Atkins, said: "Giving the green light to fracking for shale gas will send shock waves across the UK.
"Communities up and down the country will be disturbed by this reckless decision which threatens to contaminate our air and water and undermine national climate targets.
"George Osborne's short-sighted dash for gas will leave the country dependent on dirty fossil fuels - MPs must stand up for a safe and affordable future by insisting on clean British energy from the wind, waves and sun."