Changing operators' fixed phone settings -- a concept known as 'jailbreaking' -- has become widely popular around the world since the 2007 introduction of Apple's iPhone.
The move by the copyright office to give exemptions to the Digital Millennium Copyright Act (DMCA), will undermine handset makers like Apple's ability to control the installation of software programs on their phones.
The copyright office is part of the Library of Congress.
The Library of Congress, which can define exceptions to existing copyright laws, said in a statement that a user can circumvent the phone's functionality to use any legally obtained software.
The ruling also allows users to change the wireless service provider. Currently, AT&T Inc is the sole wireless service provider for Apple in the U.S.
More than a million iPhone owners are said to have 'jailbroken' their handsets in order to change wireless providers, Electronic Frontier Foundation, which fought for the exemption, said in a separate statement.
Meanwhile, an Apple spokeswoman told the Wall Street Journal that jailbreaking can severely degrade the experience of the iPhone and that it can violate the warranty and can cause the iPhone to become unstable and not work reliably.
Apple could not immediately be reached for comment by Reuters outside regular U.S. business hours.
(Reporting by Sakthi Prasad in Bangalore; Editing by Jon Loades-Carter)