The federal government says it's listened and accepted the need for continued funding for community and indigenous legal services.
But Labor has labelled the decision a humiliating backdown for Attorney-General George Brandis and a win for campaigners across the country.
The government will include $39 million of funding for community legal centres and $16.7 million for indigenous legal services over three years in its May 9 budget.
The money takes funding for the services to 2020, when a national partnership agreement with the states and territories ends.
After 2020, all jurisdictions will have to negotiate a new funding deal.
The new money for community legal centres will be prioritised for services that help domestic violence victims and their children.
Senator Brandis touted Monday's announcement as a government "investment of unparalleled magnitude".
"This is new money (and) it represents the largest single commitment on an annualised basis by the commonwealth government to the legal assistance sector ever," he told reporters in Brisbane.
Senator Brandis also defended the time taken to reach the decision - described as a "travesty" by Queensland Attorney-General Yvette D'Ath - as part of the budget process.
"We're actually announcing this in advance of the budget because we want to send a very clear signal about where the government's priorities lie," he said.
The coalition has come under sustained fire from Labor, minor parties and community groups for not guaranteeing ongoing funding to the legal services, with previous commitments set to end on July 1.
Acting shadow attorney-general Katy Gallagher welcomed the news but said it was a humiliating backflip for Senator Brandis.
"Just eight weeks out from these cuts taking effect, for those who have campaigned against the cuts, the victory is theirs today," she told reporters in Canberra.
But legal centres has already lost experienced staff because of the uncertainty and would take time to rebuild, she said.
The Law Council of Australia said it was a huge relief.
"The scheduled budget cuts would have significantly deepened the funding crisis affecting the legal assistance sector, with enormous downstream costs to taxpayers," president Fiona McLeod said in a statement.
"It heads off an impending disaster, as many community legal centres, particularly in regional areas, were set to close."
Independent senator Jacqui Lambie in March accused the government of "sledging welfare recipients with a hammer" and said everyone should have the right to legal representation whether they had money or not.
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