Bishop Paul McAleenan, who speaks for the Church on matters related to migration, described a £65 payment for the settlement scheme as "unjust".
He said: "I am pleased that the government has abandoned plans to charge EU citizens for securing their existing rights.
"As I conveyed to the immigration minister earlier this year, such charges would not only be unjust, but would also create an unnecessary barrier for many people accessing the settlement scheme."
Theresa May made the announcement in the House of Commons on Monday, as she sought fresh support from MPs for a Brexit deal.
Some 3.5 million EU nationals would have been affected by the fee to apply for settled status.
Adults and children would have needed to pay £65 and £32.50 respectively; however, people who have already gained permanent residence would have faced no additional charge.
We've been campaigning for #citizensrights of the 3.6m EU citizens in the UK for almost 2 1/2 years now. Yesterday we had a little victory with Theresa May scrapping the £65 Settled Status fee. It is time to say a big thank you to everyone who has supported us over the last years pic.twitter.com/OejnCBEB5N— the3million (@the3million) January 22, 2019
Bishop Paul added: "The Church stands in solidarity with all EU citizens who have made their home here and we will continue to engage with the government as the scheme is implemented."
The Government's settlement scheme for EU citizens has proven controversial, with human rights groups warning of a saga similar to the Windrush scandal if the scheme went wrong.
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