Malawi is to review laws banning homosexuality in response to public opinion, according to reports.
The move comes just days after the US announced it would use foreign aid to pressure countries to decriminalise homosexual acts.
America currently gives Malawi about $200m (£128m) per year, with most going to healthcare.
Malawi was condemned by Barack Obama and international activists last year after jailing two men who underwent the southern African country's first gay "marriage".
It will now review provisions of the penal code concerning "indecent practices and unnatural acts", Ephraim Chiume, the justice minister, was quoted as saying.
"In view of the sentiments from the general public and in response to public opinion regarding certain laws, the government wishes to announce to the Malawi nation that it is submitting the relevant laws and provisions of laws to the law commission for review," he told the Africa Review news site.
The decision followed protests by civil society groups and pressure from foreign donors, including Britain, which has already suspended part of its aid programme, worth £19m, over concerns of bad governance and misspending.
Earlier this week Obama told US agencies to consider how countries treat their gay and lesbian populations when making decisions about allocating foreign aid.
Hillary Clinton, the US secretary of state, told an audience of diplomats at the UN in Geneva: "Gay rights are human rights, and human rights are gay rights."
A country's cultural or religious traditions were no excuse for discrimination, she insisted. "Being gay is not a western invention. It is a human reality."
This followed a warning from David Cameron in October that countries that ban homosexuality risk losing aid payments unless they reform.
The prime minister's statement was condemned by several African countries where homosexual acts are banned, including Ghana, Uganda and Zimbabwe.
Malawi and the UK expelled each other's diplomatic envoys in April after WikiLeaks published a cable citing the British high commissioner accusing president Bingu wa Mutharika of "not tolerating criticism".
Twenty people died in July when security forces cracked down on demonstrators angry about rising prices, fuel shortages and unemployment.
Last year in Malawi, gay couple Tiwonge Chimbalanga and Steven Monjeza were sentenced to 14 years in prison for sodomy after holding a traditional engagement ceremony.
During their trial, Mutharika called homosexuality "evil and very bad before the eyes of God". He later pardoned them following a worldwide outcry against the punishment.
Homosexuality is taboo in most of Africa. It is illegal in 37 countries and often viewed as un-Christian and un-Islamic, although many of the laws were introduced during British colonialism. Activists say few Africans are openly gay, fearing imprisonment, violence and loss of jobs.
Last week Nigeria attempted to tighten its homosexuality laws when the senate passing a bill banning same-sex marriages.
Before it becomes law, it must be passed by the lower chamber and then signed by the president.
Obama has condemned a bill proposed in Uganda which would make some homosexual acts a crime punishable by death.
Reacting to Clinton's speech this week, John Nagenda, a Ugandan presidential adviser, told the BBC: "If the Americans think they can tell us what to do, they can go to hell."
