The British government is expected shortly to publish legislation dealing with republicans “on the run” from outstanding conflict-related prosecutions.
In a statement, he said the British government would not introduce an amnesty, and said returned republicans would still “be subject to the appropriate judicial processes”.
He said that the proposals “will be painful for many people”.
He stressed: “I fully understand this. But the government believes that it is a necessary part of the process of closing the door on violence forever.”
Hain told Opposition MPs that there would be “a judicial element” to the process allowing “individuals connected with paramilitary crimes committed before the Belfast Agreement” to return.
He told Liberal Democrat Ireland spokesman Lembit Opik: “As part of that judicial process concerning on-the-runs, if they are found guilty and are then granted a licence, if those conditions of the licence are broken they will be arrested again.”
Sinn Féin has pressed for special legislation enabling IRA Volunteers who fled the North during the Troubles to return without being imprisoned.
The Minister said the commitment to deal with the issue of on-the-runs was made in the British and Irish Government Joint Declaration in May 2003.
Mr Hain said that when the legislation for on-the-runs was ready, MPs could scrutinise it and make amendments if necessary.
But he stressed: “This is not an amnesty. An amnesty would mean that, as it were, in advance people who committed offences were released ever from the obligation of being punished for those offences.” Those cleared to return would “be subject to the process of the law”.
He also referred to ‘cold cases’ now being reviewed by the PSNI chief constable, Hugh Orde.
“Those cold cases will also involve, if the evidence is there, charges,” he said.
“And if they come under the on-the-runs legislation, then they will be subject to the appropriate judicial processes. There is no question of just letting people off the hook.”
Ian Paisley’s DUP had opposed an amnesty as part of its recent tranche of demands.
Nationalist SDLP negotiator Sean Farren warned the British government not to play the concessions game with the DUP.
The North Antrim Assembly member said: “It is clear.. that the more the DUP squeezes out of the British Government, the more they will come back for and the more they will try to take us all away from the Good Friday Agreement.”