Women serving in the police force "will be able to cover their heads" under their caps or berets so long as the headscarf is "the same colour as the uniform and without pattern", said the ruling published in the official gazette.
Rulings published in the official gazette come into force immediately.
The ruling Islamic-rooted Justice and Development Party (AKP) has long pressed for the removal of restrictions on women wearing the headscarf in the officially secular state.
It allowed female students to wear the headscarf in state institutions from 2013 and in high school in 2014.
More From This Section
Erdogan's critics have long accused the president of eating away at the secular pillars of modern Turkey as set up by its founder Mustafa Kemal Ataturk when he established the Turkish republic in 1923.
But pro-government media pointed out that several Western states have already granted female officers permission to wear the headscarf.
Police in Scotland this month allowed women to wear the headscarf while on duty, following a lead set by their counterparts in London over a decade ago.