Provisions contained in the Children and Social Work Bill, which is currently going through parliament, are intended to give councils the ability "to test different ways of working" within children's services by freeing them from "requirements imposed by children's social care legislation".
But the proposals are highly divisive, with a number of organisations and prominent individuals in the children's services sector opposing them.
CYP Now understands that the government has agreed to support amendments tabled by Labour's shadow children's minister Emma Lewell-Buck to remove the proposals from the bill by scrapping clauses 32, 33 and 34.
Once the government has signed the amendments the proposals will be formally removed from the legislation when the bill is at report stage in the House of Commons on Tuesday (7 March).
A source told CYP Now that the government climbdown follows a summit meeting last week between Education Secretary Justine Greening, children's minister Edward Timpson, and chief children's social worker Isabelle Trowler, with a delegation of opponents to the proposals including child protection expert Lord Laming, former children's minister Tim Loughton and Conservative MP Kelly Tolhurst.
"The delegation made absolutely clear that the clause was not needed, the timing was inappropriate, and it would be resisted in the House of Lords," the source said.
"The government should sign [Emma Lewell-Buck's] amendments today. It looks as if the message has at last got through."
Carolyne Willow, director of children's rights charity Article 39, a member of the Together for Children coalition of organisations opposing the proposals, said: "This is extraordinarily excellent news for children and young people across the country.
"Their legal protection will now remain intact, wherever they live and whoever looks after them. What a fight it has been to defend these fundamental rights, but how wonderful it is that ministers have done right by children and young people."
The U-turn comes just weeks after social work professor Eileen Munro, who had been cited by government as a supporter of the plans, spoke out against them, describing them as potentially dangerous.
But there was a degree of support for the idea from within the sector. Dave Hill, president of the Association of Directors of Children's Services said exemptions from children's social care legislation could help councils to better support young people.
The exemption clause was previously removed from the Children and Social Work Bill in November following a defeat for the government in the House of Lords.
But in January members of a committee scrutinising the bill effectively overturned that decision by voting through amended proposals by 10 to five, despite opposition from Labour MPs.
The Department for Education has been contacted for comment.