The announcement, made by government vehicles passing through neighborhoods, lifts the curfew that had been imposed at one point from 9 p.m. to 5 a.m. and ends the ban on gatherings of more than five people in Yangon.
The ruling junta on Saturday also issued an unusual plea in state media for the country's detained opposition leader, Aung San Suu Kyi, to compromise and hold talks with the government.
The apparent softening of the government's position comes after President Bush's announcement Friday that new sanctions would be imposed to punish the military-run government and its backers for the deadly crackdown.
The White House scoffed at Myanmar's moves to ease restrictions imposed after violently cracking down on pro-democracy demonstrators.
"The actions of the regime are `cosmetic'. What we need are signs of serious intent to move toward a democratic transition," presidential press secretary Dana Perino said Saturday.
"The lifting of the curfew is not a good sign, but a bad sign that the regime now feels confident that it has cleared the monasteries of dissidents by either jailing them or sending them to their home villages, and arrested all the major players in the demonstrations and sent into hiding or exile those they have not captured," Perino said.
The protests were sparked in August when authorities sharply raised fuel prices. With the support of respected monks, they grew to include tens of thousands of people.
The military responded to the growing threat by detaining thousands and shooting into the crowds of demonstrators, killing as many as 10 people. Diplomats and activists say the death toll is much higher.
Authorities in Myanmar have since cleared Yangon's streets of soldiers and released some prominent activists, although Suu Kyi remains under house arrest. And on Saturday, they announced that a 9 p.m. to 5 a.m. curfew would be lifted as well as a ban on gatherings of more than five people in Yangon. It is unclear if the decision also applies to Mandalay.
The government announced earlier this month that the junta's leader, Senior Gen. Than Shwe, was willing to meet with Suu Kyi - but only if she meets certain conditions, including renouncing support for foreign sanctions targeting the junta.
The regime accuses Suu Kyi, who has been detained for 12 of the last 18 years, and her party of working with other nations to sabotage the junta's own plans for a phased return to democracy.
Than Shwe has only met with Suu Kyi once before, in 2002. The talks quickly broke down.
In a lengthy commentary, the newspaper said the time was right for Suu Kyi to respond positively to the offer of talks "with a view to serving the interest of all."
"We are tired of watching a stalemate for a long time considering that we should not go on like this forever," the commentary said. "There should be some forms of compromise. If one side makes a concession, the other side should do so. The situation will get worse if both sides are arrogantly intransigent refusing to budge from their stand."
The views in the state-run New Light of Myanmar commentary are believed to represent those of the junta. The newspaper did not mention the sanctions.
Bush says Myanmar needs to provide the International Committee of the Red Cross and other humanitarian organizations access to political prisoners; allow Aung San Suu Kyi and other detained leaders to communicate with one another; and permit U.N. Special Envoy Ibrahim Gambari to enter the country immediately.
"If the regime is serious about talking to Aung San Suu Kyi why have they not sent the special envoy to meet with her?" Perino asked. "Why have they not invited Gambari to come back? Why have they not invited the ICRC to visit?"
U.N. Special Envoy Ibrahim Gambari met with the junta leader in Myanmar early this month, urging the leaders to bring democracy to the country, as well as twice with Suu Kyi. But he has failed so far to bring about a dialogue between the two sides.
Myanmar's repressive regime has repeatedly rebuffed the world's calls for democratic reforms, saying it will follow its own so-called road map to democracy.
The road map is supposed to culminate in a general election at an unspecified future date. But so far only the first stage - drawing up guidelines for a new constitution - has been completed, and that took more than a decade.