China's policy had limited many urban couples to only one child for more than three decades.
Christian Bob Fu, who was forced to flee China when his wife Heidi fell pregnant without a pregnancy permission card, said the announcement was a "welcoming first positive step in the right direction for women's rights for birth freedom".
The couple fled China in 1996 in order to avoid a forced termination and now reside in America where Bob is President of China Aid.
In a statement, Bob Fu said China's "coercive family planning system...violently regulates" the number of children a parents can be permitted to have, adding "the genocide of girls will not be stopped any time soon."
Historically, the country's restrictions led to an imbalanced sex ratio because of a traditional preference for boys.
According to Xinhua News Agency, The Communist Party says the decision to allow all couples to have two children was "to improve the balanced development of population" and to deal with an ageing population.
Previous easing of the one-child policy has led to fewer births than expected, and many people among China's younger generations seem to prefer smaller family sizes.
China, which has the world's largest population at 1.4 billion people, introduced the one-child policy in 1979 as a temporary measure to curb a then-surging population and limit the demands for water and other resources.
Chinese families with a strong preference for boys have sometimes resorted to aborting female foetuses, a practice which has upset the ratio of male to female babies.
The imbalance makes it difficult for some men to find wives, and is believed to fuel the trafficking of women as brides.
The decision announced on Thursday removes all remaining restrictions limiting couples to only one child.
