A High Court judgement that regulations affecting more than 2.5m EU citizens living in the UK are unlawful will not be challenged by the government.
The Home Office has confirmed it will not appeal against the ruling, despite previously indicating it would do so.
Many EU citizens could have faced losing their right to residence if they did not further apply for settled or pre-settled status within five years.
The case was brought by a watchdog for EU citizens’ rights after Brexit.
The watchdog Independent Monitoring Authority (IMA) was supported by the European Commission and the3million, a group representing EU citizens in the UK. It said the High Court ruling had “averted a ticking time bomb”.
In December, Mr Justice Lane concluded that part of the European Union Settlement Scheme (EUSS) set up by the Home Office to settle EU citizens’ immigration status was based on an incorrect interpretation of the withdrawal agreement between the UK and the EU.