"Sex workers are one of the most marginalised groups in the world who in most instances face constant risk of discrimination, violence and abuse," Salil Shetty, the organisation's secretary general, said in a statement.
"Our global movement paved the way for adopting a policy for the protection of the human rights of sex workers which will help shape Amnesty International's future work on this important issue."
Amnesty said it took the decision after two years of consultation and research, drawing on evidence from UN agencies and the findings of research missions to Argentina, Hong Kong, Norway and Papua New Guinea.
The group has come under attack by women's rights campaigners and Hollywood stars, including Meryl Streep, Kate Winslet and Emma Thompson, since a draft of its proposed policy was leaked.
Amnesty defended its new policy, saying it was the best way to defend sex workers' human rights and reduce the risk of abuse including beatings, sexual violence, arbitrary arrest, extortion, harassment, human trafficking and forced HIV testing.
It added that the policy had been shaped by discussions with sex worker groups, HIV/AIDS activists, groups representing former prostitutes and anti-trafficking agencies among others.
"I am thrilled," said Laura Lee, an Irish sex worker and activist. "It is the best way forward to take sex work out of the Dark Ages and give us the rights and protection we deserve."
Regarding human trafficking, Amnesty said the practice was "abhorrent in all of its forms, including sexual exploitation, and should be criminalised as a matter of international law".
"Amnesty just lost its soul and it lost its legitimacy to call itself a human rights organisation," said Taina Bien-Aimé, spokeswoman for the US-based Coalition Against Trafficking in Women, which helped put together an open letter against Amnesty's proposed policy.
"Amnesty has sided with the sex industry," she told the Thomson Reuters Foundation.
Laws legalising or decriminalising the sex trade have been introduced in The Netherlands, Germany and New Zealand.
Other countries, such as Sweden, Norway, Iceland, Canada and Northern Ireland, have adopted the so-called 'Nordic model' which aims to punish clients without criminalising those driven into prostitution.
"What we don't agree with is the decriminalisation of pimps, buyers and brothel owners ... They are the ones which create demand," Esohe Aghatise, anti-trafficking manager with women's rights group Equality Now, told the Thomson Reuters Foundation.
But Amnesty policy adviser Catherine Murphy said: "We have to be careful with words like pimp because people often interpret that to mean an exploitative third party and we would not be calling for the decriminalisationn of an exploitative third party."
"What (the new policy) would mean is the decriminalisation of laws on consensual sex work," she told the Thomson Reuters Foundation.
"Laws that relate to exploitation or trafficking within sex work would still be criminal offences. So the low level operational aspects of sex work such as working together for safety, renting premises, organising together... these things would no longer be criminal."
