The US diplomat's wife involved in a crash which killed teenager Harry Dunn does not have diplomatic immunity, the Foreign Office has said.
Harry's parents, Charlotte Charles and Tim Dunn, were informed of the development in a letter from the Foreign Secretary Dominic Raab.
It reads: "The question remains when such immunity comes to an end, regardless of any waiver.
"We have looked at this very carefully, as I wanted to be confident in the position before conveying it to you.
"The UK government's position is that immunity, and therefore any question of waiver, is no longer relevant in Mrs Sacoolas' case, because she has returned home.
"The US have now informed us that they too consider that immunity is no longer pertinent.
"In these circumstances, Harry's case is now a matter for Northants police and the CPS to take forward.
"That of course is done entirely independently, and it would not be right for me to comment any further."
Tim Dunn said Mr Raab's letter was "excellent news".
He told Sky News: "As we've said all along, we believed she didn't have immunity and we always believed it was just incorrect. This means so much to us."
Mark Stephens, the lawyer representing the Dunns, told Sky News that Anne Sacoolas "was very ill-advised" to have left the UK and said that it had caused the family "untold additional grief and hurt".
It comes after Mrs Sacoolas said she wanted to meet Harry's parents to "express her deepest sympathies and apologies".
Harry, 19, died when his motorbike collided with a car outside an RAF base in Northamptonshire in August.
Mrs Sacoolas, 43, was involved in the crash but returned to the US after being granted diplomatic immunity.
Mrs Sacoolas' lawyer Amy Jeffress said: "Anne is devastated by this tragic accident. No loss compares to the death of a child and Anne extends her deepest sympathy to Harry Dunn's family.
"The media reporting has been inaccurate in many respects. To begin with, Anne fully co-operated with the police and the investigation.
"She spoke with authorities at the scene of the accident and met with the Northampton police at her home the following day. She will continue to co-operate with the investigation.
"Anne would like to meet with Mr Dunn's parents so that she can express her deepest sympathies and apologies for this tragic accident.
"We have been in contact with the family's attorneys and look forward to hearing from them."
Mr Stephens told Sky News: "The most important thing for Dunn family is not whether she's prosecuted or not, they need to see her, talk to her about last moments of their son's life so they can get closure.
"They have been denied that by her fleeing jurisdiction.
"Mrs Sacoolas had her 10-year-old son strapped into the front seat of her vehicle and that would have been a traumatic experience for her son, and I'm sure the Sacoolas family are dealing with some matters that are tragic as well.
"There is a basis for having a human meeting, it has to be in private, just mum, dad and Mrs Sacoolas, and they can ask the questions and get the answers both sides think they need."
Ms Jeffress had earlier contacted the Dunn family's spokesperson Radd Seiger, who is in Washington.
Mr Seiger told Sky News: "It's a great sign [Mrs Sacoolas' lawyer has] reached out to us and we will be engaging in embracing those discussions as openly and as positively as we always do."
He added that Harry's parents see any development in the case as a "positive step forward" and the lawyer making contact was "undoubtedly a positive step forward".
Mr Seiger also said he was "crystal clear" that Mrs Sacoolas "does not have the benefit of diplomatic immunity", and continued: "Why then did the British government advise Northamptonshire Police that she did have diplomatic immunity, and they therefore could not undertake any inquiries?
"They couldn't speak to her, arrest her, let alone charge her."
Mr Seiger added: "Something's gone wrong with the family disappearing seemingly overnight."
The family spokesperson had also said it was unlikely Harry's parents would meet Mrs Sacoolas as they prepare to fly out to New York on Sunday.
The parents are planning to visit both New York and Washington DC to put pressure on the US government to "do the right thing".
Mr Seiger said the parents were appealing for witnesses who saw Mrs Sacoolas leave the UK for the US.
Speaking before the Foreign Office's letter, he said: "Anne Sacoolas left England to return to the USA following the road traffic collision outside RAF Croughton on 27 August.
"The United States government has claimed she has the benefit of diplomatic immunity and has refused to grant the waiver sought by the British government.
"I would urge anyone, on either side of the Atlantic, who has any information relating to Mrs Sacoolas' return to the United States, whether before, during, or after her departure, to please come forward."
Secret briefing notes accidentally shown by Donald Trump this week revealed Mrs Sacoolas would not be returning to the UK to face trial.
A card for the US president marked "secret" instructed Mr Trump to respond to a direct question about whether Mrs Sacoolas would be returned to the UK by saying she would not.
Prime Minister Boris Johnson said on Friday that the US was "ruthless" in safeguarding Mrs Sacoolas and it was "very reluctant" to allow its citizens to go on trial abroad.