The Corporation of London has announced that it has withdrawn the threat of a legal notice to remove the protesters camped outside St Paul's Cathedral.
A spokeswoman for the corporation confirmed that the authority has "pressed the pause button" on legal action.
A statement released by the City of London corporation’s policy chairman, said: "The church has changed its standpoint and announced it is suspending legal action on its land.
"Given that change, we've pressed the 'pause' button overnight on legal action affecting the highways - in order to support the cathedral as an important national institution and give time for reflection.
"We want to leave more space for a resolution of this difficult issue - while at the same time not backing away from our responsibilities as a Highway Authority.
"We're hoping to use a pause - probably of days not weeks to work out a measured solution.
‘We will make a further announcement tomorrow lunchtime."
The move follows a similar suspension of legal action by the cathedral authorities earlier today.
Following a meeting between cathedral officials and the protesters, St Paul's Canon Pastor the Right Reverend Michael Colclough, said: "I believe we had a very useful beginning to what must be an ongoing dialogue."
When asked about the church authorities decision to suspend the threat of legal action, legal action, Colclough said: "This is not a PR stunt, it is a breakthrough in Christian dialogue."
Speaking to The Huffington Post UK, a female protester (name withheld) said: "We're over the moon that they [the church] have dropped their eviction plan. We've said all along we will go peacefully if told. But it's not going to close down occupy London. It will just move somewhere else."
A male protester (name withheld) offered: "It's sad that the focus has been on the church rather than the banks. But the church has now said they are not going to try to evict us...and that's because of the discussions, the dialogue, we have had.
"They are so used to dealing with the people round here [the bankers] rather than us. Maybe it is good that the pressure and media has made them listen. But we wouldn't have the camp here in the first place if the church didn't let us be here to begin with. So it's sad in a way. People are talking about the church not the bankers."
He added that the camp had become "a media scrum".
The withdrawal of the threat of legal action represents a U-turn by the corporation, who were reportedly ready to serve a legal notice to the demonstrators on Tuesday.
On Monday, the row claimed another victim as the cathedral's Dean, the Right Rev Graeme Knowles, resigned saying his position was "untenable".