Italy's prime minister Giuseppe Conte has halted the launch of tenders for a high-speed rail link to France through the Alps.
The move is designed to calm a dispute over the project which had threatened to bring down the government.
Conte said in a post on Facebook that he's asked TELT, the company overseeing the project, to halt the tenders.
He added that his government was committed to "totally re-discussing" the project.
The multibillion-euro project is backed by Matteo Salvini's League party but strongly opposed by its coalition partner, 5-Star Movement.
It argues that Italy's share of the funding would be better spent upgrading existing roads and bridges.
Tensions between the two sides had escalated ahead of a Monday deadline for TELT to launch tenders to carry out works on it.
Conte published a response from TELT, which said it would only launch the tenders for the French portion of the rail link on Monday in order to avoid losing European Union funding.
Conte said that Italy would hold discussions with France and the EU in light of a recent cost-benefit analysis commissioned by the Italian government, which found the TAV was a waste of
Deputy Prime Minister Luigi Di Maio, who is leader of the 5-Star Movement, said earlier in a Facebook post that the dispute was "being resolved positively."
The TAV is a joint venture between Italy and Frances to link Turin and Lyon with a 58-km tunnel through the Alps on which work has already begun.
The EU has pledged to fund up to 40 percent of the costs of the TAV, Italy up to 35 percent and France up to 25 percent.
Italy's transport minister, a 5-Star official, puts the total price tag at more than 20 billion euros.
His French counterpart, Elisabeth Borne, said on Friday the European Commission had let it be known it was willing to increase its share to 50 percent, leaving France and Italy to finance 25 percent each.
A European Union official had told Reuters news agency that the project could lose up to 300 million euros of EU funds if the tenders were not launched by the end of March.