The Pandemic Unemployment Payment will be extended to 31 March 2021, the Minister for Social Protection, Heather Humphreys has said.
The scheme was due to close to new entrants on 31 December.
She said the decision to keep the payment open to new entrants to March next year followed engagement with businesses in the retail and hospitality sectors in recent weeks.
The minister said staff were concerned that if they returned to work in December, then they may not be able to access PUP again in the New Year if they needed to.
She said the move was to ensure peace of mind and so people would not choose not to go back to work in case they were not able to access this payment.
She said she was hopeful that people will not need to go back on the payment next year, but she said nothing is certain with Covid-19 and she wanted to give certainty to people.
She said she did not want people being stressed about it coming up to Christmas.
Minister Humphreys said since the Level 5 restrictions took effect in October, 145,000 people have availed of the PUP payment, mainly those in the retail, hospitality and personal services sector.
The Restaurants Association of Ireland has been vocal in calling for the extension of the payment beyond the end of the year.
Its concern - matched by the retail and wider hospitality sectors - is that workers could be fearful about returning to employment next month if they feel their industries will close again in January.
The PUP scheme has paid out €4.3bn to date, with €104m paid out this week in the PUP to just over 350,000 people.