The number of people who were off work with long-term sickness fell by 12,000 in the October-December period 2014 compared with a year earlier.
The number of those who are long-term sick stood at 2.03m in December 2014,figures from the Office of National Statistics figures revealed.
The long-term sick account for 22.4% of the economically inactive between October-December 2014.
There are more people who are long-term sick than unemployed, with the number of unemployed people falling by 97,000 to 1.86m.
The number of people who were temporarily sick was 183,000, down 7.8% on a year earlier but up 2.2% on the previous quarter.
Iain Duncan Smith, secretary of state for Work and Pensions, said: "In the week that Universal Credit started its nationwide roll out, these figures show that a reformed welfare system goes hand in hand with helping people to take advantage of the record number of vacancies available."
Myles Rix, managing director of Protection at LV= said: "The fall in the rate of unemployment is positive news for both workers and the UK economy but many people would struggle to make ends meet if redundancy or illness prevented them from working.
"Unfortunately, some of us will be off work for a prolonged period of time at some point in our working life and would benefit from a back-up plan such as income protection, and the peace of mind it offers.
"Regardless of whether someone has a family or owns their home, income protection provides working people with a valuable financial safeguard which enables them to meet their monthly commitments, should the unexpected happen."