The Berejiklian government has refused to back down on its council mergers in Sydney, but has abandoned the proposed mergers in regional parts of the state.
All 20 existing mergers will remain in place in Sydney, while the remaining five merger proposals will proceed subject to the decision of the courts.
None of the pending merger proposals for regional councils will proceed.
Elections for the pending councils are to occur as soon as possible after the mergers take place, with the government hopeful residents will got to the polls next year.
The decision was reached in an extraordinary meeting of cabinet, convened for the express purpose of resolving the council mergers issue.
The decision is set to inflame anti-merger advocates who have persistently called for a reversal of the policy, including the de-amalgamation of already merged councils.
Last May, 44 councils were sacked and replaced with 19 larger councils, helmed by an administrator until council elections in September 2017.
Tuesday's decision follows more nine months of legal action waged by a string of councils across the state after the policy was announced by the Baird government last May.
The newest council, the Bayside Council, was proclaimed in September following the conclusion of legal action by the former Botany Bay council, taking the total number of mergers to seven in the city and 13 in the bush.
But the legal action has kept a further 11 merger proposals affecting 29 councils from proceeding, with a new round of legal challenges due to be heard in the NSW Supreme Court of Appeal this month.
Woollahra Council, which is fighting a merger with Randwick and Waverley councils, is due to have its legal challenge considered by the High Court this month.
Pressure mounted on the Berejiklian government to determine its commitment to the policy after Nationals leader and deputy premier John Barilaro vowed last month to end local government mergers in the bush.
Mr Barilaro's commitment came the day after Mike Baird announced his resignation as premier on January 19, and before the Liberal partyroom had anointed Ms Berejiklian their new leader.
Since taking up the premiership, Ms Berejiklian signalled she would reconsider the policy, promising to listening to the community and, after chairing her first cabinet meeting, declaring "I will fix this".
The option of plebiscites was initially canvassed as a solution to determine whether mergers in the pending council districts should proceed, but Tuesday's decisions shows this path has been abandoned.
- Story first appeared at smh.com.au