The institute originally rejected the drug in draft guidance published last year, arguing that it was not cost effective.
It overturned this decision in March after criticism from the Atrial Fibrillation Association and hundreds of healthcare professionals and MPs.
NICE said it had decided to recommend use of dronedarone because, although it is more expensive, it is associated with fewer adverse effects than other antiarrythmic drugs.
The guidance recommends that dronedarone should only be used in patients whose AF cannot be controlled by first-line therapy with beta blockers.
It also recommended that it should be limited to patients who also meet one of the following risk factors:
- hypertension requiring treatment with at least two different drug classes
- previous systemic embolism, stroke or TIA
- left atrial diameter greater than 50mm
- left ventricular ejection fraction of less than 40%
- aged 70 years or older without NYHA class III or IV heart failure