Data sharing proposals had been condemned by opposition parties
Controversial plans to allow people's details to be shared between organisations have been dropped, said Justice Minister Michael Wills.
He told MPs that a clause in the Coroners and Justice Bill, which had been fiercely opposed by the Tories and Lib Dems, had been withdrawn.
Concessions have also been made on plans for inquests without juries which will now have to be approved by judges.
Opposition parties welcomed the twin decisions but asked for more details.
Shadow justice secretary Dominic Grieve described the removal of the data sharing proposals as a "belated U-turn" by the government.
The Lib Dems said plans for secret inquests in England and Wales were "misguided" and they would continue to oppose any moves which "undermined" the jury system.
The data plans prompted heated debate in the Commons when the bill was discussed in January - and former home secretary David Blunkett had raised some concerns about whether they were justified.
They would have allowed ministers to apply for orders to remove data protection restrictions preventing the use of information for secondary purposes in certain circumstances.
Justice Secretary Jack Straw had argued that it would mean bereaved families would not have to speak to different departments and agencies many times over when a relative died.
But the Liberal Democrats had said data sharing would not just be restricted to public bodies and people's information could have been give to private companies in any country.
In the Commons on Tuesday Mr Wills told Lib Dem MP Adrian Sanders: "I hope it will give your constituents some reassurance that we have now withdrawn the clause that they are worried about."
Mr Grieve welcomed it as a "belated U-turn on proposals for unlimited data sharing across government".
But Mr Wills said it was not a U-turn but the "proper process of parliamentary scrutiny".
"What should happen with legislation is that the government brings it to ... Parliament and it is then scrutinised and when on occasion the opposition make a reasonable point, we respond appropriately.
"In this particular case it became clear that the powers were drawn too widely. We've therefore withdrawn them and we will be redrafting them and bringing forward the powers in future."
On the issue of coroners' reform, Justice Secretary Jack Straw said he intended to "fundamentally recast" measures regarding inquests in light of concerns among MPs.
The final decision on whether an inquest can be heard without a jury will be made by a judge sitting as a coroner not ministers.
The circumstances in which a secretary of state could seek a private inquest would be "significantly tightened", he added.
Ministers had argued that certain inquests would need to be held in private if they involved sensitive information whose public disclosure could harm national security.
The controversial proposal was dropped from last year's counter-terrorism bill but aspects of it were subsequently revived.
Opposition MPs and civil liberties campaigners say juries are essential to ensuring accountability and cases of pressing public interest, such as deaths of serving military personnel and deaths in police custody, must be held in public.
Mr Straw said there may be a few exceptional cases where inquests may take place without a jury but they would be "very few and far between" and would require judicial approval.
"I hope and believe that it meets the concerns that have been expressed," he said of the changes.