The British government is cutting the rate of interest on its 3.7 billion euro loan to Ireland.
UK Chancellor George Osborne said the move would be in the "national interest" of Britain.
The move came after eurozone states agreed a new bailout package designed to shore up the positions of debt-laden members, including Ireland and Greece.
Mr Osborne said he had told his Dublin counterpart Michael Noonan of the decision to reduce the bilateral loan interest on Friday morning.
"I've been arguing for some time that the interest rates charged for eurozone loans were too high. I'm pleased therefore they have now reduced those rates," he said.
"That enables Britain to cut its rate on its loan to Ireland, while ensuring all of the benefit goes to Ireland and not to higher interest rates paid to euro area governments. We will still be more than covering the cost of our borrowing.
"We stayed out of the Greek bailout as promised. But, for Britain, Ireland is a special case. Our loan will help them and is in our national interest."