Taxi drivers have been told by licensing officials they cannot fly flags from their passenger windows for health and safety reasons. Cabbies in Ashfield district have been told the flags could poke passengers in the eye or fly off and hit someone.
A letter from the council warns the flags might snap off and injure people.
Two weeks ago the council said all flags had to go, but drivers are now being told they are free to fly the flags from their driver-side window.
"We strongly recommend the flags are not flown on the passenger's side, but if they want to fly them on the driver's side or from their aerial - that is up their own discretion," a council spokeswoman said.
Ashfield taxi driver Paul Allin, said: "I don't think the flags would damage anyone seriously if they came off.
"It's England's time for the World Cup this year, so that's why I'm flying my flags."
The rule applies to all clip-on flags that attach to windows - and not just England flags.
The rule was passed by the district's taxi owners' forum and "is a measure to protect the public based on advice from the Vehicle and Operator Services Agency".
The council said drivers are welcome to display other types of flags that do not pose a danger to passengers or the general public.