The announcement from the Chinese government signaled a possible breakthrough in a dipolmatic entanglement involving the two countries.
"The Chinese government has indicated that it will accept Mr. Chen's applications for appropriate travel documents," U.S State Department spokeswoman Victoria Nuland said in a statement.
"The United States government expects that the Chinese government will expeditiously process his applications for these documents and make accommodations for his current medical condition. The United States government would then give visa requests for him and his immediate family priority attention."
A U.S. university offered a fellowship to Chen and his wife and children could travel with him, the State Department said.
Liu Weimin, in a statement on the Chinese Foreign Ministry's Web site, said Chen was receiving treatment in a Beijing hospital but could study abroad if he goes through "normal channels to take care of the relevant processes at the relevant departments in accordance with the law," The Wall Street Journal reported.
The ministry's statement followed an intense round of negotiations between China and the United States that ended dramatically when Chen, who fled house arrest in late April, addressed a U.S. congressional panel via a cellphone held by an American Christian activist.
Chen called Congress from his hospital room in Beijing and requested free passage to the United States.
"I want to come to the U.S. to rest. I have not had a rest in 10 years," Chen said. "I'm concerned most right now with the safety of my mother and brothers. I really want to know what's going on with them."
He asked for a meeting with U.S. Secretary of State Hillary Clinton, who was in Beijing for economic talks.
"I hope I can get more help from her," he said.
But neither Clinton nor her Chinese counterparts mentioned Chen at the end of two-day talks on trade and security issues, saying instead that differences on human rights matters must not disrupt the broader relationship between the two powers.
In a telephone interview with The Washington Post, Chen said he does not blame American officials for his predicament after he left the U.S. Embassy in Beijing under a U.S.-China deal. He accused Chinese officials of reneging on their promise to restore his freedom.
"It's not a one-time-only decision," Chen told the Post. "It doesn't mean I won't come back. As a free person, I believe I am endowed with the right to leave China when I want to and come back anytime I want."
Liu said Chen could qualify for permission to study abroad despite his conviction in 2006 on destruction of property and obstructing traffic charges, which his supporters say were trumped up by local authorities.
"According to Chinese law he's now a normal Chinese citizen, and through normal means he can apply through relevant procedures," Liu said.
He said he didn't know whether Chen's family would be allowed to leave.
U.S. lawyer Jerome Cohen, who advised Chen this week, told The New York Times the proposal could be a face-saving solution for China, defusing a situation that threatens relations between the two countries.
Chen told the Journal Thursday his family was being mistreated after he escaped house arrest in Shandong province.
"While I was in the embassy, the situation back home was awful," he told the Journal.
"[Local authorities] were in my house, in my room. They wouldn't let my family close the door. I feel my family members aren't very safe in China."
The Washington hearing was called by the Congressional-Executive Commission on China, led by Republicans Frank Wolf of Virginia and Christopher Smith of New Jersey.
Wolf said he would introduce a bill that would seek all State Department and White House communications concerning Chen's case.
Republicans, including presidential hopeful Mitt Romney, demanded the White House work to ensure the safety of Chen and his family.