Cabinet ministers had been summoned to urgent talks in a conference call, amid pressure from several ministers for the government to pull back from the brink of a crushing defeat.
The pulling of the vote is certain to prompt speculation that Ms May will head back to Brussels immediately, to try to secure better exit terms and win a later Commons vote.
However, more than 100 Tory MPs have spoken out against the deal – pointing to an unwindable task – and both the EU and the UK have insisted the terms of the Irish backstop, in the withdrawal agreement, cannot be rewritten.
Andrea Leadsom, the Commons Leader, announced the prime minister would make an oral statement to MPs this afternoon on the way forward.
The prime minister’s spokeswoman had insisted the talks were simply to update the cabinet on talks the prime minister held over the weekend with various EU leaders.
It was unclear whether the government can easily pull the vote, given that MPs have already approved a business motion for it to take place.
Labour suggested No 10 would need to table a new business motion, which could be lost – which would mean Tuesday's meaningful vote still takes place.
Jeremy Corbyn seized on the announcement as proof that the UK no longer had a “functioning government”, calling for Labour’s approach to be adopted.
“The government has decided Theresa May's Brexit deal is so disastrous that it has taken the desperate step of delaying its own vote at the eleventh hour,” he said.
And the anti-Brexit Best for Britain group said the dramatic events underlined the need for a Final Say referendum, to give the decision back to the public.
“This is an unprecedented and historic humiliation for Theresa May,” said David Lammy, a Labour supporter, adding: “After two years of negotiations with the EU, she is not even prepared to let MPs vote on her deal.”
Nigel Dodds, the Democratic Unionist Party’s deputy leader, said: “If this is about kicking the can down the road and getting some tweaks to the political declaration... she knows that is not going to work.”
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