The government is to drop plans forcing all schools in England to become academies.
Education Secretary Nicky Morgan announced the climbdown, with the bill facing defeat by Tory rebels who claimed that rural primaries could be forced to close and that top-performing schools should not be forced to change their status.
As academies, schools are run by a non-profit 'academy trust' and often as part of a chain. Though not under local authority control, they are state-funded.
The government U-turn comes amid the threat of industrial action by head teachers.
The National Association of Schoolmasters Union of Women Teachers (NASUWT) welcomed the decision. "This is another humiliating failure for the Chancellor of the Exchequer," it said in a statement.
"Teachers, school leaders and schools have been subjected to an unnecessary period of anxiety and panic as a result of his ill-conceived and politically motivated statement, which did not even command the support of the Tory rank and file, particularly in local councils, and caused rebellion in his own ranks."
The plans for all schools to convert to academy status by 2022 or have plans in place to do so met with widespread criticism when announced in the Budget. Among them were dozens of Tory MPs who said that rural primary schools in their constituencies could be forced to close if they lose local council support and are instead run by distant academy trusts.
The law will be replaced by one allowing the government to compel schools to convert to academies in local authorities with consistently poor exam results.
Morgan said in a statement: ""I am today reaffirming our determination to see all schools to become academies. However having listened to the feedback from parliamentary colleagues and the education sector we will now change the path to reaching that goal.
"By focusing our efforts on those schools most at risk of failing young people, and encouraging good and outstanding schools to seize the opportunities of conversion, we will ensure the continued growth of the academy programme, empowering frontline heads and school leads and transforming even more children's education."
Lucy Powell MP, Labour's Shadow Education Secretary, said: "It is welcome news that the Tory Government has finally listened to Labour and the alliance of head teachers, parents and local government who opposed these plans, and dropped the forced academisation of all schools.
"It is frankly a humiliating climb down for David Cameron and his Education Secretary, who just weeks ago were insisting they would plough on with the policy regardless."