The council's Transforming Our Primary Schools programme, which aims to reduce the number of surplus primary school places in the area, had included plans to shut Clervaux Nursery School in Jarrow.
The local authority planned to amalgamate Clervaux with Jarrow Cross Church of England Primary School because an evaluation concluded the borough had "too many primary schools". The report said six of South Tyneside's 51 primary schools were almost half-empty and 15 had more than 25 per cent surplus places.
But following an excellent Ofsted report on Clervaux last week, the council has abandoned plans to close the nursery.
At a special meeting of the cabinet, Labour councillor Jim Foreman, the lead member for children, said: "There have been a number of discussions about the proposals and we have decided to remove Clervaux from the recommendations."
Ann Stevens, acting head teacher at Clervaux, said she was "over the moon". "Parents are looking for longer hours, and we can now think about adaptations to the building, as well as staffing," she said.
