Hong Kong's leader has agreed to delay an anti-subversion bill that prompted a protest by about 500,000 people who called it a threat to their freedoms.
Article 23 caused the largest protests since Tiananmen Square
Chief Executive Tung Chee-hwa held an emergency meeting with his council early on Monday, then issued a statement to say he was backing down from earlier demands that the national security bill be passed on Wednesday.
A great blow to Tung's rule
Professor Li Pang-kwong, Lingnan University
Some analysts and lawmakers have said Mr Tung might not be able to survive what has become the biggest crisis of his administration.
The BBC's Francis Markus says the latest setback will further undermine Mr Tung's credibility, who is already under fire over his response to Hong Kong's economic problems and the Sars epidemic.
Pro-democracy lawmaker Leung Yiu-chung called for Mr Tung's resignation, saying: "This is an unprecedented political calamity that has wiped out the power and reputation of his administration."
Mr Tung's hopes of passing the bill by Wednesday evaporated after a key legislative ally, James Tien of the pro-business Liberal Party, resigned from Tung's top policymaking body on Sunday night.
Mr Tien re-iterated that the bill should be delayed to allow for further public consultation.
Tung Chee-hwa: In trouble with Beijing?
On Saturday, Mr Tung had sought to push the bill forward by watering down three provisions that had come under intense fire from critics who call the bill a threat to Hong Kong's freedoms of speech, press and assembly.
He has repeatedly said such charges were overblown and civil liberties will remain protected.
But last Tuesday's protest - on the sixth anniversary of Hong Kong's handover - was the biggest there since one million people demonstrated against Beijing's deadly crackdown on the Tiananmen Square pro-democracy movement in June 1989.
Organisers said tens of thousands of the city's 6.8 million people would rally again when the bill came before the legislature.
"In the light of the position of the Liberal Party, we have decided... to defer the resumption of the second reading of the bill and to step our efforts to explain the amendments to the community," Mr Tung said in a statement.
He reiterated that the bill will still have to be passed, as required under Article 23 of the mini-constitution put in place when Hong Kong reverted from British to Chinese sovereignty on July 1, 1997.
The victory must go to the people in Hong Kong who are so courageous and so peacefully demonstrated on the street to voice out their demand
Yeung Sum, Democratic Party leader
But he said the Liberal Party's stance had made it clear that the bill would need to be delayed.
The Liberals have been major allies of Tung's administration since the handover, and their eight votes would have been sufficient to stop the bill that is firmly opposed by 23 of the 60 members of the Legislative Council.
About 50 legislators and activists protested on Sunday, saying the bill must be slowed down so the public can be better consulted.
Critics say the government has gone too far with a measure that imposes life prison sentences for many crimes against the state.
Acknowledging the massive outpouring of discontent, Tung said earlier he would scrap a provision of the bill that allows some groups to be banned, add protections for journalists who publish classified information and delete a provision that would let police conduct searches without warrants.
But opposition lawmakers and some journalist groups said the watered-down bill still did not offer enough protections for the news media.
Democratic Party leader Yeung Sum said the deferral of the bill was "the victory" of the people of Hong Kong.
Mainland China's government said on Sunday the bill should be approved as scheduled, raising the stakes as both sides of the issue sought to build support in the political drama that is unprecedented in post-handover Hong Kong.
Several key government allies and lawmakers, including Mr Tien, went directly to Beijing and met with Chinese central government officials to discuss the issue, heightening perceptions that Tung has lost his authority.
One political scientist called Mr Tien's resignation "a great blow to Tung's rule."
Professor Li Pang-kwong, who teaches at Lingnan University, said Mr Tung is in serious trouble after failing to gauge public opinion on the anti-subversion bill.
"If he insists on getting the bill passed Wednesday, the government will not get enough votes from the legislature," said Professor Li.