President Obama told the executive branch, on Attorney General Eric Holder's recommendation, to stop enforcing the statute because it was unconstitutional in light of a June Supreme Court ruling that overturned a key part of the U.S. Defense of Marriage Act, Holder wrote in a letter to House Speaker John Boehner, R-Ohio.
The overturned provision defined marriage as a "legal union between one man and one woman."
The court said the federal government could not discriminate against same-sex couples whose marriages were recognized under state law and said the government must provide legally married gay couples with the same federal tax, health, Social Security and other benefits received by opposite-sex married couples.
"Decisions by the Executive not to enforce federal laws are appropriately rare," Holder wrote in his letter. "Nevertheless ... the unique circumstances presented here warrant non-enforcement."
Boehner's office had no immediate comment on the letter, which can be found at tinyurl.com/UPI-same-sex-veterans-benefits.
The administration's move will let same-sex spouses of service members living in states where their marriage is legally recognized get healthcare benefits. It also lets widows and widowers of same-sex marriages receive survivor benefits, among other privileges.
Since the Supreme Court's ruling, the Pentagon and Office of Personnel Management said they would treat gay marriages equal to opposite-sex marriages for purposes of federal benefits. The Internal Revenue Service said last week it would do the same thing in tax treatment.
Holder said in his letter the court's DOMA decision did not directly address the constitutionality of the statute limiting veterans benefits to opposite-sex married couples.
But he said, "The reasoning of the opinion strongly supports the conclusion that those provisions are unconstitutional under the Fifth Amendment."
He added the administration saw no point in waiting for a more definitive court result.
Continued enforcement of the statute "would likely have a tangible adverse effect on the families of veterans and, in some circumstances, active-duty service members and reservists, with respect to survival, healthcare, home loan and other benefits," he wrote.
A VA spokesman said the department -- the government's second largest after the Defense Department -- would work to act on the administration's decision "in a timely manner."