The Consumer Prices Index (CPI) measure of inflation in the UK fell to 3.0% in April, from 3.5% in March, official figures showed Tuesday.
The Retail Prices Index (RPI) fell from 3.6% in March to 3.5% in April.
In further evidence that the weak economic climate is forcing retailers to cut prices to draw in customers, clothing and footwear prices rose by just 0.
2% in the period compared with 1.4% last year, analysts said.
And softer excise duty rises on alcohol and tobacco, as well as lower air fares due to the timing of Easter, also helped keep a lid on the rising cost of living.
Bank of England Governor Sir Mervyn King narrowly avoided sending his 10th "Dear Chancellor" (Finance secretary) (letter to explain why inflation is higher than the Government's 2% target, as at 3% it is now within one percentage point of that goal.
The Bank of England recently said inflation would remain above the 2% target "for the next year or so".
Inflation has fallen from 5.6% last September due to the waning impact of the VAT hike at the start of 2011, falling energy, food and commodity prices and a number of bill cuts from utility providers.
However, it has not dropped as quickly as the Bank of England expected after fears over increasing tensions between the West and Iran pushed oil prices higher in March.
The sharp decrease in inflation in April is likely to bolster the case for the Bank to pump more emergency cash into the economy through its quantitative easing programme, printing money.
The economy entered a technical recession in the first quarter of the year as gross domestic product declined 0.2%, following a 0.3% drop in the final quarter of 2011.
Chloe Smith, a Treasury minister said: "Inflation is down and back within the target range for the first time since 2010, which is good news and will provide some welcome relief for family budgets." The most significant downward pressure on prices in April came from the transport sector, which saw prices rise 1.2% compared with a 2.8% rise the previous year.
Retailers have kept prices low and sacrificed profit margins in a bid to draw in cash-strapped consumers, whose confidence has been knocked by the weak economic climate, the analysts added.