Plans for a partial ban of smoking in pubs, cafes and restaurants in England are set to be dropped.
The ban proposals went out to public consultation in June
Ministers had proposed banning smoking in most enclosed public spaces - except where no food was served.
Now they are understood to be looking at banning smoking in all public places - but allowing one enclosed room for smokers, with no bar, food or staff.
Consultations have suggested the idea of a partial ban would be too hard to enforce and fail to meet health fears.
Whitehall sources say no decision has yet been made on an alternative to the partial ban.
But ministers are looking closely at what having "smoking carriages" in bars, where bar staff would not serve drink.
Smokers could pop into the room for a cigarette before returning to the main bar area.
TUC general secretary Brendan Barber praised the government for being "brave" enough to take on the smoking lobby.
But he said bar staff would still inhale smoke if they had to clean the "smoking carriages".
Conservative shadow health secretary Andrew Lansley said the government was performing a humiliating U-turn.
He said the Tories had argued a partial ban would be unworkable and lead to widening health inequalities.
"We need to ensure that the public is not exposed to other people's second-hand smoke unless they wish to be," he said.
Liberal Democrat health spokesman Steve Webb said: "We have long argued that the rights of people who work in smoky environments should be paramount.
"A partial ban was always illogical, public opinion is now sympathetic to a total ban and the onus is on the government to push ahead swiftly with this."