The Government is to re-open an embassy in the Vatican more than two years after it was closed for cost reasons.
It will be a scaled-back "one-person" mission focusing on development aid and it will be located in new premises in the Vatican.
There was controversy in late 2011 when the Government decided to close the mission on cost grounds.
The Italian embassy was then transferred to the Villa Spada, which had housed the Vatican embassy.
The Department of Foreign Affairs said the return of the embassy in the Vatican will "enable Ireland to engage directly with the leadership of Pope Francis on the issues of poverty eradication, hunger and human rights".
There will be four other new embassies in Indonesia, Thailand, Kenya and new EU member Croatia.
New consulates will be set up in Hong Kong, Sao Paulo and Austin in Texas to aid what is seen as an export-led recovery.
The Irish Aid office in Sierra Leone will be upgraded to an embassy.
The department said the new embassies and consulates will cost €4.7m a year.
It also said that Ireland's embassy in Lesotho will be closed and the embassy in Lithuania will be downsized.
Archbishop of Dublin Diarmuid Martin welcomed the announcement and said the Vatican is an important place of "interchange on questions of global development".
He said that a resident Irish ambassador will enhance relations between the Vatican and Ireland.
Chairman of the Oireachtas Joint Committee on Foreign Affairs and Trade Pat Breen said the embassy will provide a vital link between Ireland and the Vatican and the move was a "sensible resolution" to the issue.
Papal Nuncio welcomes move
The Papal Nuncio to Ireland has warmly welcomed the Government's decision to reopen the Embassy to the Holy See with a residential ambassador.
Speaking to RTÉ News in Belfast, Archbishop Charles Brown called it "the right decision" and an "excellent decision for the people of Ireland".
He said "it will help Ireland in a major way, bringing the unique and important perspective of the country to the world stage in the area of foreign policy".
This evening, Dr Brown became the first representative to this country of a Roman Pontiff to preach in an Irish Protestant church when he preached at a multi-denominational service at Saint Anne's Church of Ireland Cathedral in Belfast City centre.
The service is the highpoint of a series of island-wide events marking the annual international Week of Prayer for Christian Unity which began last Saturday.
He told the large, mixed congregation that the pioneers of the century-old push for Christian unity - known as the ecumenical movement - "would be very pleased to see the day when a Papal Nuncio would reflect on the Word of God in the Cathedral of the Church of Ireland in Belfast".
Archbishop Brown said that thankfully, Christians worldwide had "come a long way" over the past century in improving inter-church relations.
But, he added, the Cathedral Dean, John Mann's, kind invitation to him to preach in Saint Anne's "needs also to be seen in a more local context as well, as a sign of the truly remarkable progress made in recent years" on the island of Ireland "towards reconciliation and mutual understanding between people of different traditions".
He said Christians were "profoundly indebted to those who worked so hard and who risked so much to bring us to where we are today".
He urged those present, including leaders in the city of the four main Christian Churches, to thank God for "the amazing progress which has been made in ecumenical relations", and urged them to join him in recommitting themselves as individuals and as Churches to doing everything we can to bring that progress forward, and to make unity a reality.
Local Church of Ireland Bishop Alan Abernethy said the Nuncio's visit was "just a natural progression of a deepening of relationships and friendships between Christians here and of a growing trust and honesty and openness".
He said the process "even involved being able to disagree in love".