Mr Brown said ministers would 'continue to consult on the matter'
Ministers have shelved plans to exempt MPs' expenses details from the Freedom of Information Act, after the Tories and Lib Dems said they would fight it.
Prime Minister Gordon Brown said the government had thought it had cross-party agreement but would now "continue to consult on the matter".
Campaigners said it was a victory for "people power" after a web protest.
The Conservatives accused ministers of a "U-turn" while the Lib Dems said it was a "humiliating climbdown".
MPs were due to vote on Thursday on plans to exempt their expenses from the Freedom of Information (FOI) Act.
Labour MPs were to be ordered to vote through the changes, while the Tories and Lib Dems said they would instruct their MPs to vote against them.
Mr Brown was challenged about it by two Tory backbenchers at prime minister's questions who asked why there "should there be one law for the people and another for politicians".
At the start of PMQs Mr Brown told MPs there would be a free vote on the matter.
He said: "We thought we had agreement on the Freedom of Information Act as part of this wider package."
"Recently that support that we believed we had from the main opposition party was withdrawn. On this particular matter, I believe all-party support is important and we will continue to consult on that matter."
But less than an hour later the government said the plan would be shelved.
The High Court ruled last year that details of claims made under the second homes allowance, including receipts, should be published in the interests of transparency.
Campaigners had denounced the planned Commons vote as effectively overturning the High Court ruling and said MPs were trying to exempt themselves from a law had they created.
MPs will still vote on Thursday on separate proposals to tighten up auditing procedures, involving the National Audit Office in some checks, as well as some changes to the Commons rule book on expenses and a move to publish expenses under 26 headings - previously they were published under nine.
The Conservatives denied they had initially struck a deal with Labour not to oppose the changes.
Shadow Commons leader Alan Duncan said it was "not acceptable" that, having made the FOI law, MPs could go back and change it because they did not like it.
"I don't think that retrospective escape route was really acceptable," he said.
He said the government had "backed down" because the Tories had decided to whip their MPs to vote against it.
The Lib Dems, who described the FOI exemption proposal as "outrageous", said the decision was a "humiliating climbdown" by the government.
"It is also a victory for everyone who thinks that politicians should be open and accountable to the people who pay their wages," said party leader Nick Clegg.
Freedom of information campaigners welcomed the decision, saying the proposal to limit disclosure would have made MPs the only public officials immune from public scrutiny.
But they warned it was not the end of the matter and similar plans could resurface in future. Maurice Frankel, director of the Campaign for Freedom of Information said: "Some MPs are clearly desperate to prevent the release of past expenses claims which are likely to have exceeded what could reasonably be justified to the public."
An internet campaign by MySociety urging MPs to vote against the change attracted more than 6,000 supporters on the Facebook website.
Peter Facey, of pressure group Unlock Democracy, warned if the vote had gone ahead it would have had "a catastrophic impact on the reputation of Parliament." He urged the Commons to publish all expenses details "at the earliest opportunity".
But Commons leader Harriet Harman told the BBC publishing all 1.2 million receipts would have created "a blizzard of information at great expense" and new proposals being debated on Thursday would provide a "robust audit" of claims.
Asked in the Commons if all receipts would now be published, she said she had not yet been able to speak to the House of Commons authorities - who are responsible for holding the information- as to "how they intend to proceed".
However she said the government would proceed with a plan to publish expenses claims under 26 headings as it would "provide information to members of the public without it having been requested" for all MPs.