They have described the use of the drug, dexamethasone, as a "major breakthrough".
An Oxford study has found Dexamethasone reduced death rates by a third for patients on ventilators, and by a fifth for patients needing oxygen.
The results have been published from the Recovery trial which is assessing a number of different possible COVID-19 treatments.
It is thought the drug - which costs just £5 per dose - could have saved between 4,000 to 5,000 lives if it had been used earlier in the pandemic.
Professor Martin Landray, from Nuffield Department of Population Health, who is co-leading the trial, said: "This is a result that shows that if patients who have COVID-19 and are on ventilators or are on oxygen are given dexamethasone, it will save lives, and it will do so at a remarkably low cost."
His co-lead investigator, Peter Horby, said dexamethasone - a generic steroid widely used in other diseases to reduce inflammation - is "the only drug that's so far shown to reduce mortality - and it reduces it significantly".
The UK Government's Chief Scientific Adviser, Sir Patrick Vallance, said: "The speed at which researchers have progressed finding an effective treatment is truly remarkable. It shows the importance of doing high quality clinical trials and basing decisions on the results of those trials.'
England's Chief Medical Officer Professor Chris Whitty has hailed it as 'a major milestone' for treating coronavirus.
Dexamethasone saves lives in COVID-19. RECOVERY trial shows dexamethasone decreases risk of death in those needing oxygen by 20%, and by 35% in those on a ventilator. On the shelf, cheap and can be taken by everyone - a real breakthrough.— Peter Horby (@PeterHorby) June 16, 2020
“Dexamathasone has delivered significant results in trials to help people recover from Covid 19. This is tremendous news in the fight against this virus.”- PV pic.twitter.com/YIeHEZQ7Uh— Sir Patrick Vallance (@uksciencechief) June 16, 2020
This is the most important trial result for COVID-19 so far. Significiant reduction in mortality in those requiring oxygen or ventilation from a widely available, safe and well known drug. Many thanks to those who took part and made it happen. It will save lives around the world. https://t.co/zRIaHulHOe— Professor Chris Whitty (@CMO_England) June 16, 2020
The NHS is making the steroid available as a treatment for patients today.