Campaigner Neil Herron welcomed the decision
The government is acting to end the prosecution of so-called "metric martyrs" - traders who continue to sell goods using only imperial measures.
The government will shortly issue new guidelines to local authorities to encourage "proportionate" action.
Campaigner Neil Herron called the decision "a fantastic victory".
Last year the EU advised that the UK could carry on using imperial measures, but some councils have continued to take action against people doing so.
Earlier this month Janet Devers, an east London trader, was found guilty of using imperial weighing scales without an official stamp in a prosecution brought by Hackney council.
Last September, European Union commissioners recommended that Britain could carry on using imperial measurements such as pints, pounds and miles alongside metric units.
This is a fantastic victory for people power and this shows you what you can do if you stand up to be counted
The Department for Innovation, Universities and Skills said it wanted to ensure action against traders using the imperial system was "proportionate, consistent and in the public and consumers' interest".
Metric measurements were introduced into the UK in the 1970s, but under legislation brought in during January 2000, all goods sold loose by weight are required to be sold in grams and kilograms.
However, the rules have led to a succession of "metric martyrs" - traders unwilling to bend to the EU legislation.
A campaign began eight years ago after Sunderland greengrocer Steve Thoburn was prosecuted by the city council and convicted for using scales with only imperial weights.
He died four years ago, and his friend Mr Herron took up the cause to clear his name.
"This is a fantastic victory for people power and this shows you what you can do if you stand up to be counted, draw a line in the sand, say this is bad law and we're not going to accept it," said Mr Herron.
But he said he would continue to fight to change the law and clear Mr Thoburn's name.
The Department for Innovation, Universities and Skills said Innovations Secretary John Denham would introduce new guidelines within months that would prevent local authorities from taking traders to court.
A spokesperson for the department said: "While individual enforcement decisions are rightly a matter for Trading Standards, we are keen to encourage action that is proportionate, consistent and in the public and consumer's interest.
"Which is why the National Weights and Measures Laboratory, which is responsible for overseeing the legislation in this area, is updating guidance with local authority bodies for trading standards officers.
"In addition, we are reviewing the current legislative framework with a view to making it easier for everyone to understand, business to comply with and trading standards officers to enforce."