Britain would "favourably consider" arming Kurdish forces in their battle against Islamic State (IS) militants in Iraq, a spokesman for the prime minister's office said on Thursday.
"If a request from the Kurds did come in that would be something we'd favourably consider, we'd be open to that eventuality," a Downing Street spokesman said.
The update followed the latest meeting of the government's emergency Cobra committee, which has met daily on the situation in Iraq for the past week.
Until now, Britain has helped to transport military supplies donated by other states to the Kurdish forces but has resisted a more direct role.
France and the United States have already said they are delivering military equipment to Kurdish forces, and Germany has indicated it may also do so.
US President Barack Obama declared on Thursday that US air strikes had broken the siege of Mount Sinjar, but said they would continue against IS extremists if they threaten US personnel and facilities in the region.
Britain earlier suspended aid drops to civilians trapped on the mountain in northern Iraq after the situation there eased, shortly after delivering its seventh consignment of aid.
A surveillance mission by Royal Air Force (RAF) Tornado jets overnight reinforced a US assessment that the number of people under seige on Mount Sinjar by IS militants was smaller than previously believed.
Officials said additional aid drops remained an open option and that London would continue to provide humanitarian support across the region
Earlier, Prime Minister David Cameron welcomed the improvement in the situation and said British Tornado jets and Chinook helicopters would remain ready to help the aid effort.
"Our plans need to be flexible enough to respond to this situation," he said.
Britain has sent an advisor to the refugee camp at Dohuk to establish what support is needed there, and Cameron agreed in a conversation with German Chancellor Angela Merkel on the need to coordinate the humanitarian effort.
"While the situation on Mount Sinjar is better than we had feared, and a rescue mission now looks far less likely, we will continue to monitor this situation closely with our US partners and Kurdish forces," a Downing Street spokeswoman earlier said.
Foreign Minister Philip Hammond is to use Friday's meeting of European Union foreign ministers to press for better co-ordination of aid and military supplies to Iraq, the spokeswoman said.