A six-hour meeting of the Labour Party National Executive Council (NEC) ruled he could appear on a leadership ballot without needing to collect nominations from MPs.
Mr Corbyn faces a challenge from at least one former frontbench MP over accusations of ineffective leadership, particularly during the European Union referendum campaign, amid fears he would lead the party to a crushing electoral defeat.
The decision makes it likely that Mr Corbyn can cling onto power with the support of unions and left-wing Labour members, despite losing the confidence of the vast majority of his own MPs, and will increase speculation about a possible split in the party.
Mr Corbyn will now be automatically included on the ballot in Labour’s leadership contest. The secret vote at the NEC went 18-14 in the opposition leader’s favour following marathon talks at the party’s headquarters in central London. Jubilant Corbyn supporters gathered outside the building and at rallies in the capital, celebrating the news with cheers and applause.
But the fury of Mr Corbyn’s opponents was summed up by John McTernan, a former special adviser to Tony Blair, who said the decision was the “end of the Labour Party”. He said: “The unions have destroyed the Labour Party. The National Executive Committee has voted to kill the Labour Party, and it’s a disgrace.”
He added that Mr Corbyn “wants a Labour Party that can never, ever win an election”.
A party spokesman said: “The NEC has agreed that as the incumbent leader Jeremy Corbyn will go forward onto the ballot without requiring nominations from the Parliamentary Labour Party and the European Parliamentary Labour Party.
“All other leadership candidates will require nominations from 20 per cent of the Parliamentary Labour Party (PLP) and European PLP.”
The ruling will come as a major blow to the majority of Labour’s MPs, who are desperate to oust the party leader.
NEC members wrestled with legal advice over whether Mr Corbyn would need to secure 51 nominations to make it on to the ballot after both sides insisted Labour’s rulebook backed their case.
Without automatic inclusion in the race, he would almost certainly have been unable to defend his position.
The result makes the leadership bid by former shadow business secretary Angela Eagle far more challenging as she faces a major battle to overturn his overwhelming backing among grassroots party members. Left-wing Corbyn supporters swelled Labour’s ranks following last year’s general election, prompting accusations of entryism.
In an effort to prevent outsiders influencing the leadership election, the NEC also decided to raise the fee for registered supporters who are not Labour members from £3 to £25.
Party members will also have had to be signed up on 12 January of this year in order to take part in the one-member, one-vote election.
Ms Eagle said: “I’m glad Labour’s NEC has come to a decision. I welcome the contest ahead. And I am determined to win it.”
Ms Eagle, who has met the nominations threshold, launched her leadership challenge on Monday, promising to make Labour electable again after the “howl of pain” expressed in the Brexit vote by people who felt they had been ignored for too long.
Another MP, Owen Smith, is also understood to be considering a leadership bid.
Labour’s civil war intensified after the EU referendum when 172 of the party’s MPs indicated that they had no confidence in Mr Corbyn in a vote in which he garnered the support of just 40 Westminster colleagues.
Dozens of MPs have resigned from the Labour front bench, leaving gaps in the shadow cabinet.
Jeremy Corbyn said last night that he was “delighted” to be automatically included on the ballot in Labour’s leadership contest and pledged to campaign “on all the things that matter”.
Transport union TSSA said “good sense” had prevailed at the meeting.
General secretary Manuel Cortes said: “With the Tories united behind Theresa May and our NEC now united behind Jeremy Corbyn it would be better for our members, better for our party and most of all, better for our country, if all sides of the party now come together, agree that we have more in common than that which divides us and work together to deliver a united and effective opposition to Theresa May’s Tory government.”
The NEC had been presented with conflicting legal advice over Mr Corbyn’s position, with Labour-commissioned analysis claiming he would need the nominations, but Unite-backed advice from Michael Mansfield QC concluding that he did not because he is a sitting leader.
The battle could still end up in the courts, with the anti-Corbyn camp indicating ahead of the vote that they would weigh up a legal challenge if he was allowed to stand without nominations.
Speaking outside Labour Party HQ following the decision, a defiant Mr Corbyn urged Labour MPs to abandon plans to overthrow him.
As jubilant supporters cheered, Mr Corbyn told reporters gathered outside: “I’m sure Labour MPs will understand that the party has to come together in order to present to the British people the options of a different and better way of doing things.”
He said he hoped his opponents would not mount a legal challenge over the decision, and said anyone who had any disagreements should “come and talk about it”.
But the offer will do little to appease furious MPs who have complained bitterly about the difficulties of trying to engage with the leadership team.
Mr Corbyn said: “I have been elected, last year, ten months ago today, with a very large mandate. I respect that mandate. It’s a responsibility I’m carrying out.
“I would hope there isn’t going to be a legal challenge. There’s been a very long legal discussion this afternoon. There were very well-qualified lawyers on hand to advise, so I think we are fine.”
Meanwhile, a YouGov poll for the Election Data website found the Labour leader’s backing dissolving among rank-and-file union members.
In the survey of 1,221 trade union members from Unite, the GMB, Unison, Usdaw and the CWU, almost two-thirds of respondents said he was doing badly as leader compared with 33 per cent who said he was doing well.
More than three-quarters said it is unlikely that Mr Corbyn will ever become prime minister and more than two-thirds said it was unlikely Labour would win the next election with him as leader.