Royal Mail will be valued at £3.3 billion when it makes its stock market debut and more than 690,000 private investors will receive shares under the offer.
The Government said all retail investors who applied for between the £750 minimum and £10,000 worth of shares will receive 227 shares worth £749.10, meaning that nearly 95% of all applicants will pick up stock in the privatisation.
But many hoping to secure a bigger slice of the company will be disappointed after the Government said retail investors who applied for more than £10,000 worth of shares will get none after the offer was seven times over-subscribed.
The Department for Business said a third of the stake in Royal Mail - excluding the 10% of free shares being given to Royal Mail staff - has been allocated to retail investors, up from an initial plan to offer the general public 30%.
The remainder will be sold to big institutional investors, such as pension funds, insurers and hedge funds.
More than 93,000 people who submitted an application for the minimum value of shares will receive their order in full, with 37% of investors getting at least half of the amount they wanted.
Details of the plans for share allocation came as the Government announced Royal Mail shares will be priced at 330p, at the very top of its 300p to 330p price range, valuing the business at £3.3 billion.
The privatisation will initially raise £1.72 billion for the Treasury.
Conditional trading on the stock exchange begins tomorrow amid expectations that the share price could rise dramatically to around 400p.
Business Secretary Vince Cable said: "We have struck the right balance, increasing the proportion of shares going to small investors to ensure they get their fair share and ensuring the employees get a 10% stake in the business."
David Cameron tweeted: " I'm glad every small investor will get their #RoyalMail shares - their investment will help deliver a 1st class service."
More than 700,000 retail investor applications to buy shares had been made by the time of Tuesday night's deadline, while the institutional offer was more than 20 times over-subscribed.
The decision to shun large-scale private investors in favour of those seeking small amounts follows similar moves in the heavily-subscribed privatisations of the 1980s.
The Government is initially floating up to 52.2% of the value of the company, with a further 10% stake being allocated free to nearly 150,000 employees.
This will leave the Government with a 37.8% holding in the company, although this could be reduced to 30% under a so-called "over-allotment" option, which is dependent on share price performance following the flotation.
If its stake is reduced to 30%, the Government will have made £1.9 billion from the flotation.
But the Communication Workers Union says that the taxpayer has lost out in the Government's haste to sell-off Royal Mail.
Billy Hayes, CWU general secretary, said: "This successful British company has been flogged on the cheap for no good reason.
"It was flourishing in public ownership, could have accessed private capital in public ownership - as many other companies do - and could have continued to provide a high service in public ownership.
"Instead it has been thrown an uncertain future based on profit margins not services."
Royal Mail employees - including bosses - who applied for up to £10,000 worth of shares through the staff priority offer will receive their orders in full, the Government said.
The value of free staff shares will be based on the closing price of shares next Tuesday, when shares will be openly traded and retail investors will be able to buy and sell the stock.
Mr Cable has been forced to defend the privatisation against claims that it has undervalued the public assets being sold, including large sites in London where property prices have been rising rapidly.
MPs have voiced concern that the sell-off will be highly lucrative for speculators, hedge funds and investment banks rather than the public.
Next week, results of a ballot of CWU members are expected to back industrial action over issues linked to privatisation.
Demonstrators dressed as robbers will protest over the share sale outside the Stock Exchange tomorrow.
Royal Mail insists the flotation will give it flexible access to private capital and be a positive for the universal postal service.
Moya Greene, chief executive of Royal Mail, said: " It is gratifying that Royal Mail enjoys the confidence of such a strong group of investors.
"With these institutions, many of whom are responsible for people's pensions and savings, and with UK citizens and our own people backing Royal Mail, we are much better positioned to be the universal service provider for the country."