The move, more than a decade after the nuclear disaster, will deal another blow to the fishing industry in Fukushima, which has resisted such a move for years.
Work to clear the water will begin in about two years, the government said, and the entire process is expected to take decades.
“Under the premise of strict adherence to regulatory standards that have been set, we are opting for oceanic release,” the government said in a statement after relevant ministers formalized the decision.
The water will need to be re-filtered to remove harmful isotopes and will be diluted to meet international standards before release.
The decision comes about three months before the postponed Olympic Games hosted by Tokyo, with a number of events planned just 35 miles from the destroyed factory.
The disposal of polluted water from the Fukushima Daiichi plant, which is run by Tokyo Electric Power, has proven to be a thorny problem for Japan as it pursues a decade-long decommissioning project.