Ministers have been urged to resume direct aid payments to the government of Malawi in a report by a cross-party committee of MPs.
The UK cut ties with the African state after the British ambassador to the country, Fergus Cochrane-Dyet, was expelled for questioning its record on human rights.
Malawi's government at the time said it was not expecting the UK to take such drastic action, adding that it thought the UK would simply replace Mr Cochrane-Dyet.
The diplomat was told to leave after he was quoted as expressing concern about human rights in the African country and calling then-president Bingu wa Mutharika intolerant of criticism.
As a result, International Development Secretary Andrew Mitchell stopped sending aid money through the government in "general budget support". While the amount of UK support given to needy people in the country was not reduced, it was directed via different channels.
But since Mr Mutharika's death in April, the committee said new president Joyce Banda has started to reverse many of her predecessor's authoritarian policies.
In a report, the Commons International Development Select Committee said the UK should recommence giving direct aid to Malawi, one of the world's poorest countries.
Chairman Sir Malcolm Bruce MP said: "Malawi has seen dramatic changes over recent months. When we visited the country in March, the political climate was very unstable, and the economy had almost entirely ceased to function. President Banda began to fix these problems immediately upon coming to office. The policies she is currently pursuing deserve UK support. If this progress is maintained, general budget support will be the most efficient option, both for the Malawian people and for the UK taxpayer."
Mr Mitchell said: "The International Development Committee is right to point out that British aid is protecting the poorest people in Malawi and I recently announced emergency support for basic health services and help to stabilise the country's economy.
"On my recent visit to Malawi I saw that Joyce Banda's government is making good progress. The nature of future British support for Malawi - including general budget support - depends on political and economic progress being maintained. Britain's support for Malawi has helped protect the poorest people following the devaluation of the kwacha as well as ensuring more than 100,000 babies will be born with the help of skilled medical professionals and more than a quarter of a million more girls attend primary school."