Patel told parliament the decision was made "due to the significant reduction in the momentum of attacks in Europe" between September and November.
The decision was made by the Joint Terrorism Analysis Centre (JTAC) on Thursday last week, she added.
The threat level from Northern Ireland-related terror in the British province remained at "severe", according to the domestic intelligence service, MI5.
JTAC's membership includes MI5 and its overseas counterpart MI6, and police, and assesses all intelligence relating to terrorism at home and abroad.
"Severe" is the second-highest of five levels and indicates an attack is "highly likely". "Substantial" indicates an attack is "likely".
Britain raised the threat level from "substantial" to "severe" at the start of November after a deadly shooting rampage in Vienna and several attacks across France.
The attack in Vienna left four people dead. Police in the Austrian capital said the attack was carried out by a known Islamist extremist who had spent time in prison.
In October, three people were killed in a knife rampage in the southern French city of Nice in an attack the government described as an act of "Islamist terror".
It followed the shock beheading by a suspected Islamist radical of a teacher who showed a class a caricature of the prophet Mohammed.
The level was briefly raised in the UK on two occasions to "critical", the maximum level indicating an attack is "highly likely in the near future", in May and September 2017.
The move was in response to conflicts in Syria and Iraq. In the same year Manchester and London both suffered deadly attacks by Islamists militants.
It was also changed to "critical" in August 2006 after the security services said they had foiled a plot to blow up flights between Britain and the United States.
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