The executive order, signed in a live television broadcast following a cabinet meeting, allows "good citizens" to more easily own firearms, said Bolsonaro, a former army captain.
"To guarantee the legitimate right of defense, as president I am using this weapon," he said, indicating the pen he then used to sign the decree.
The far-right president ran on a law-and-order platform. His message resonated with voters in Brazil, which in 2017 had a record 64,000 murders, more than any other country.
Tuesday's decree makes it much easier for adults with no criminal record to buy guns and keep them at home.
It does not extend to carrying weapons -- concealed or otherwise -- in public, which remains restricted to police, public or private security personnel, and the military.
A ministerial source told AFP that the new decree took effect immediately, without needing congressional approval.
Bolsonaro has said he wants to overturn a 2003 law that was tantamount to
banning civilians from purchasing guns.
On the campaign trail he often mimicked a pistol by extending the thumb and forefinger with his hand.