The reduction will come into force on February 19 and will apply to the 7.5 million homes on British Gas’ standard tariff.
On average customers will save £79 on their annual household gas bill.
Managing Director Phil Bentley said: “We’re very pleased to be able to announce this price cut for our gas customers.
“At British Gas we understand energy bills are a significant cost and we are committed to providing the best possible prices for customers.
“This price cut will go some way to helping customers manage their budgets, and we will continue to do what we can, when we can.”
British Gas came underfire last year after announcing sharp increases in profits after also pushing through price rises.
In its announcement the company insisted the wholesale gas market remained extremely volatile, but said buying gas in advance had cushioned customers from any recent increases caused by the dispute between Russia and Ukraine.