Queensland Attorney-General Yvette D'Ath announced the government was withdrawing the appeal on Tuesday, "having received a further considered legal advice about the State's prospects of success".
Lex Wotton, the Palm Island man who launched the landmark federal court case against the Queensland Police Service (QPS), says he's relieved by the decision.
"I can relax, more than anything," he told NITV.
The initial federal court ruling, handed down in December last year, found police had breached the Racial Discrimination Act amidst community unrest after the death in custody of Mulrunji Doomadgee, awarding $220,000 in damages to Mr Wotton and his family.
'I can spend some time with my family now.'
Mr Wotton previously served 20 months in jail over the violence that took place after Mulrunji's death, before launching the case against QPS.
He says the ongoing legal action has taken a toll on his family.
"Time consuming, stressful and everything else," he says.
"When you look at today's news, (it's) real relieving... I can spend some time with my family now."
Mr Wotton thanked his legal team, led by Stewart Levitt, for "hanging in there" and "helping me to be strong".
'A real turning point' for Palm Island
Federal Labor Member for Herbert, Cathy O'Toole, was amongst those who criticised the state government's decision to appeal the ruling.
She says the move to drop the appeal is "a real turning point" for the Palm Island community.
"It's a real opportunity for them to put the past in the past and to focus on the future, and we can all move on together," Ms O'Toole told NITV.
The Labor MP says it's likely that widespread criticism of the appeal led to Tuesday's decision.
"I’m sure any government today listens to the voices of people in the community, and I think most likely that has been the case," she says.
"But what’s really, really important here is that the people on Palm Island feel that they have been listened to and that their rights have been respected."