French prime minister Edouard Philippehas announced a suspension of fuel tax hikes in an effort to appease an increasingly radicalised protest movement.
The planned increase, which has provoked riots, will be suspended for several months.
The move comes just three weeks after Mr Philippe claimed the French government would not change course and remains determined to help wean consumers off polluting fossils fuels.
It is unlikely Mr Philippe’s announcement to MPs will put an end to the road blockades and demonstrations, with more protests possible this weekend in Paris.
"It’s a first step, but we will not settle for a crumb," said Benjamin Cauchy, one of the leaders of the protests.
After a third consecutive weekend of clashes in Paris led by protesters wearing distinctive yellow traffic vests, Mr Philippe held crisis talks with representatives of major political parties on Monday.
He also met with French president Emmanuel Macron and other ministers in order to find a quick solution to the crisis.
Facing the most serious street protests since his election in May 2017, Mr Macron has cancelled a two-day trip to Serbia to stay in France this week.
More than 100 people were injured in the French capital and 412 arrested over the weekend during France’s worst urban rioting in years, with dozens of cars torched.
The protests began last month with motorists upset over the fuel tax hike, but have grown to encompass a range of complaints, with protesters claiming Mr Macron’s government does not care about the problems of ordinary people.
As a result of the planned protests, Saturday's Ligue 1 football match between Paris Saint-Germain and Montpellier has been postponed.
The planned new tax was to increase petrol prices by 4 euro cents per litre from January next year.
Petrol currently costs about 1.42 euro (£1.20) a litre in Paris, slightly more than diesel.
Since the movement kicked off on November 17, three people have been killed and hundreds injured in clashes or accidents stemming from the protests.
Over the past three weeks, protesters have been setting up road blockades across the country, and their movement has garnered wide public support.