Attorney-General Yvette D'Ath confirmed this month the government would appeal over a decision handed down by the Federal Court in December that found police had been racist following the death in custody of Mulrunji Doomadgee in 2004.
But in the Brisbane Federal Court on Tuesday, lawyers for the state government announced it would still pay the damages to Palm Island man Lex Wotton and two of his family members.
The announcement comes amidst widespread criticism of the government's appeal, which has been slammed by Palm Island Mayor Alf Lacey and three north Queensland MPs.
More than 16,000 people have also signed a petition, created three days ago by Indigenous health campaigner Gracelyn Smallwood, demanding the state government drop the appeal.
The appeal will likely be heard in May.