The new visas will be valid until 2015. This will allow the Rohingya, who come from Myanmar's coastal Rakhine state, which borders Bangladesh, to stay on in India and pursue asylum. It will give them access to education for their children in public schools, one of their main demands during a month of demonstrations.
The UNHCR called the government's decision "a huge step forward for their protection and safety in India". But the decision does not give the Rohingya what many of them sought - official refugee status. That would have allowed them access to a resettlement programme in a third country and financial assistance from UNHCR if they are unable to work.
Sujzaed Islam, 32, who has lived in India for the past four years, described the Indian government's visa decision as "muddy".
"We now have to go back to where we came from in India and apply for new visas. People already fear the Indian system, so this does not make it any easier," he said.
"I was reduced to being a porter for the [Myanmar] military even though I got the highest marks in school. I was not allowed to go to college."
Three decades ago, the government of Myanmar said the Rohingya, along with other ethnic minorities, did not qualify for citizenship, thus denying them many rights.
About 2,500 Rohingya, who are all Muslim, participated in the protest in New Delhi in an effort to obtain better access to refugee services in India, where about 7,000 refugees from Myanmar have registered with the UNHCR in New Delhi.
According to Human Rights Watch, there are an estimated 100,000 refugees from Myanmar living in the north-east of India. The UNHCR has no access to this part of the country because the border is contested. Travel, by both Indians and foreigners, to the region that borders China and Myanmar is carefully monitored by the Indian government.
Many of the protesters in New Delhi had feared they would be sent back to Myanmar as the April elections indicated the country, long ruled by a military junta, was embracing political reform.
A week ago the police removed the protesters from their makeshift camp in front of the UNHCR's office in Delhi.
They then squatted outside the Sultan Garhi tomb in Vasant Kunj in Delhi until yesterday.
The Rohingya who participated in the protest returned to their jobs across India yesterday, after assurances by the UNHCR that the government would provide the long-term visas.
Zaibur Rahman, 26, came to New Delhi with his wife and eight-month-old child, Misbah, to join the protest. He had been working as an electrician in the state of Uttar Pradesh for the past four years. He fled Myanmar after the military junta took away his uncle and his brothers for "being caretakers of a mosque", said Mr Rahman.
"We are stateless there and we are refugees here. All I want is for my child to not meet the same fate as the rest of my family."
India does not grant refugees and those seeking asylum the right to work in the country. Instead, they work in what Indians call the informal sector, as maids, waiters or in garment factories, where identification papers are rarely an issue.
The UNHCR said that India's ad hoc system makes protecting vulnerable people especially challenging.
"In India, there is no national legal framework for refugees and because of this, there are different approaches to different groups of people," said Nayana Bose, with the UNHCR. This means that the status and rights of each refugee group must be negotiated.
Despite the hurdles, Sayed Islam, who fled Myanmar for India a decade ago, has no intention of returning.
He brought his eight children and wife to the protests in New Delhi from their home in Jammu and Kashmir where he works as a day labourer.
Mr Islam always carries a one-kyat currency note to remind him of his home country, along with his Myanmar ID card.
"We are restricted in [Myanmar] and are not even allowed to travel to neighbouring villages without permission," he said. "Our daughters cannot get married without official consent. Our sons cannot attend college. Our land has been taken away from us."
"We left for a better life and we do not want to go back. We want to live here with better rights."