Controversial plans to sell 258,000 hectares of state-owned woodland in England have been abandoned.
Environment Secretary Caroline Spelman told MPs the government had "got this one wrong", as she announced the current consultation was being halted.
Instead, it is understood a new panel of experts will be set up to look at public access and biodiversity within the publicly owned woodland.
Labour said it showed the government was "incompetent" and "out of touch".
The plans were intended to give the private sector, community and charitable groups greater involvement in woodlands by encouraging a "mixed model" of ownership.
But critics argued it could threaten public access, biodiversity and result in forests being used for unsuitable purposes.
The public outcry over the plans led to half a million people reportedly signing a petition against the sell-off.
In a statement to MPs, Mrs Spelman announced the policy was being removed from the Public Bodies Bill currently going through Parliament.
She said: Ms Spelman said: "I would first like to say that I take full responsibility for the situation that brings me before the House today.
"Let me make it clear that we have always placed the highest priority on preserving access and protecting our forests.
"But the forestry clauses in the Public Bodies Bill, published well before we launched the consultation, gave the wrong impression as to the government's intentions."
Mrs Spelman added: "I'm sorry. We got this one wrong, but we have listened to people's concerns."
She also said: "One of the things we teach our children to do is say sorry. It is not a humiliation; it is my choice."
David Cameron hinted on Wednesday that he was backing away from the policy. Asked during Prime Minister's Questions whether he was happy with the plans, he said no.
Shadow environment secretary Mary Creagh welcomed the U-turn, saying to Mrs Spelman: "Can I begin by welcoming your full and frank apology to this House and to the nation on getting this so very wrong. I am sure the last 48 hours have not been easy for you."
Labour leader Ed Miliband MP said: "Virtually every person in the country could see selling off our forests was a foolish and short-sighted policy but they went ahead regardless. Now they are panicked into a retreat hours after Mr Cameron said they would carry on with their consultation.
"This is a chaotic and incompetent way to run government."
'No win situation'
Former deputy prime minister Lord Heseltine said he was "rather surprised" by the climbdown as there was little evidence that forests were better run in the public sector than in private hands.
"I know of no argument that says a government department is more likely to run a forest better than the National Trust," he told an edition of BBC One's Question Time to be broadcast later on Thursday.
Lord Heseltine, who advises David Cameron on regional economic issues, said ministers could not "win" in such a situation as "if you don't change your mind you are accused of being obstinate and pig-headed and if you do change you mind you are accused of being weak".
He added: "I think it does show a degree of strength as long as you don't do it too often because then you become prone to making mistakes."
The government is allowed to sell off 15% of England's woodlands in each four-year public spending period.
The current planned 15% sale of about 40,000 hectares is on hold while criteria are examined to ensure public benefits are protected, ministers say, but it is due to go ahead over the next four years - raising an estimated £100m.
Labour also expressed concern over job cuts due at the Forestry Commission, which will see it lose a quarter of its workforce.