Gen Sir Richard said that respect for gays, lesbian, bi-sexual and trans-sexual officers and soldiers was now "a command responsibility" and was vital for "operational effectiveness".
"Respect for others is not an optional extra, it is a command responsibility and an essential part of leadership, teamwork and operational effectiveness. We must get dealing with each other in the Army right, so that we also get it right when dealing with other populations on operations, when we often have men and women from other nations under command," he said.
The military's defence chiefs had previously claimed that allowing homosexual personnel to serve openly in the forces would impact on operational effectiveness and was prejudicial to military discipline.
The Army itself has often had a difficult relationship with the gay community in comparison to the Royal Navy and RAF. Only last year, Gen Dannatt banned soldiers in uniform from attending the Gay Pride march. By contrast, gay personnel from the Royal Navy and the RAF were encouraged to attend in uniform.
The armed forces ban on homosexual serviced personnel was lifted in 2000 following a ruling by the European Court of Human Rights, which described it as a "grave interference" in the private life of individuals.
When the ban was in place gay and lesbian service personnel were ruthlessly hunted down by members of the special investigation branch of the Royal Military Police. Troops who "confessed" to being gay after hours of interrogation were disciplined or discharged from the military for being in breach of military law.
Apparently things have changed a lot since. The General said at the London conference, "We have made real progress in our understanding of equality and diversity in the military context, and there is a desire to achieve more yet."
Sources close to the general told the Sunday Telegraph that he wanted to demonstrate that the modern Army is a tolerant organisation, where people of any sexual orientation can make a valuable contribution.
The source added: "There will be a reaction to this by some in the Army but I think the majority of soldiers will welcome it. Being gay isn't the issue it once was. What matters on the battlefield is how you fight not who you sleep with - it's just not an issue."