The new policy says head coverings and headgear are acceptable for religious beliefs and medical conditions, but for no other reason.
State Public Safety Director Mike Coppage said his department was delivering the rule change to county probate judges on Friday, and that it would take effect Monday.
Muslim women who had complained were glad to see the state's quick response. "This is a victory for religious freedom for everyone in this country," said LaTonya Floyd of Mobile.
The new policy requires that the face be visible from the top of the forehead to the bottom of the chin and from the hairline on one side to the hairline on the other side.
Troy King, the governor's legal adviser, said the change would maintain the state's goal of being able to identify a person from a driver's license photo while being respectful of people's religious beliefs and traditions.
The state Department of Public Safety issued new driver's license rules in March that prohibited head coverings. The new rules were supposed to help law enforcement officers match people with their licenses.
Muslim women complained to Riley and legislators that their religion required them to wear a head scarf, or hijab, that covers their hair, ears and neck.
In response, the governor asked Coppage and King to review the complaints and see if changes could be made. King said the change in policy would also accommodate Roman Catholic nuns and people who are wearing head coverings after losing their hair due to cancer treatments.
People wearing a head covering for a medical reason must have a statement from a licensed physician in Alabama noting the medical condition. Veils are not permitted under the revised policy.
Floyd complimented the governor for responding quickly to the women's complaints and not waiting until someone sued the state.
"When the governor saw that rule, he said, oh no, we've got to get that changed," she said.
Ibrahim Hooper, spokesman for the Council on American-Islamic Relations in Washington, said the policy change brings Alabama in line with the majority of states.
Coppage cautioned that the rule change would not accommodate a common request from motorists who want their photos taken while wearing sunglasses. He said sunglasses and eye patches can only be worn for verified medical reasons.