Trials found that Pembrolizumab, given with chemotherapy, could extend the lives of certain patients by around four months.
It also increased the time before the disease got worse by two months.
Oesophageal cancer is considered one of the six “less survivable” cancers. Only one in five patients who has stage four of the disease lives beyond a year.
Medicines assessor NICE recommended the immunotherapy drug as a treatment at the end of life and estimated that around 1,000 people in England would be eligible.
Prof Was Mansoor, consultant medical oncologist at The Christie NHS Foundation Trust, said a trial had shown that the drug could more than double the number of patients who survived for two years after starting treatment.
He added: “Advanced oesophageal cancer can be very aggressive, with limited treatment options that offer only modest benefits for patients.
“Improvements in treatments for these patients has been in urgent need for the last half century. This approval from NICE is a major step forward in addressing these needs.
“This represents a paradigm-shift in the treatment of oesophageal cancer and will likely change clinical practice for oncologists.”
The drug costs £2,630 per 100mg vial at list price and patients take 200mg every three weeks or 400mg every six weeks. Manufacturer MSD, which sells it under the brand name Keytruda, has agreed a confidential discount with the NHS.
Oesophageal cancer affects the pipe that carries food from the mouth to the stomach and is the 14th most common cancer in UK adults.Around 9,200 people are diagnosed per year.