Three people have died so far in riots across France over fuel tax hikes. Earlier, representatives of the protesters had refused to meet a government delegation after threats from far-right groups.
French Prime Minister Edouard Philippe announced on Tuesday a six-month suspension of fuel tax increases planned for January 1 in a move to end violent "yellow vest" protests against the measure.
The suspension will be accompanied by other measures aimed at calming two weeks of nationwide demonstrations by the protesters.
"No tax merits putting the unity of the nation in danger," Philippe said in a televised address, adding that the anger on the streets "originates from a profound injustice: of not being able to live with dignity from one's work".
He also announced that increases in the cost of gas and electricity, also set to take effect from January 1, would be suspended for three months during the winter months.
Philippe added that a tightening of the technical assessment for cars, which was set to penalise heavily polluting older vehicles, would also be suspended for six months.
Philippe said the protesters and the government shared the same objective - "that work pays" - and acknowledged that France had some of the highest taxes in Europe.
The demonstrations, which degenerated into street clashes and vandalism in Paris over the weekend, erupted last month over the fuel taxes which are financing France's anti-pollution efforts.
Originally spurred by the soaring cost of fuel this year, they quickly ballooned into a wider revolt over President Emmanuel Macron, accused of pursuing policies which hit low-income households particularly hard.
Halting the fuel tax increase was one of the main demands listed by "yellow vest" leaders, alongside a higher minimum wage and the return of a wealth tax on high-earners abolished last year.
TRT World's Craig Copetas has more.
Macron made the decision to suspend the 2019 fuel tax hikes late on Monday, the sources said, after his government spent the day meeting with leaders from all of France's political parties.
Many were pressing the president to assuage the anger after the running urban battles seen in the capital on Saturday, when dozens of cars were burned and shops attacked and looted.
TRT World's Ali Mustafa has more from Paris.
Macron's popularity hits new low amid French protests - poll
French President Emmanuel Macron and Prime Minister Edouard Philippe's approval ratings hit new lows as the "yellow vest" protests gathered pace, according to an Ifop-Fiducial poll for Paris Match and Sud Radio published on Tuesday.
Macron's approval rating fell to 23 percent in the poll conducted late last week, down six points on the previous month. Philippe's rating fell 10 points to 26 percent.
The president's score matches the low charted by his predecessor Francois Hollande in late 2013, according to Paris Match. Hollande was then considered to be the least popular leader in modern French history.
Protesters knock wind out of French business, economy
Three weeks of "yellow vest" protests have hit the French economy hard, with trade in shops, hotels and restaurants falling significantly, Finance Minister Bruno Le Maire said on Monday.
Speaking after a meeting with industry groups and business federations affected by the protest movement, Le Maire said sector revenues had been hit by between 15 and 50 percent.
While not providing a precise breakdown, Le Maire said small retailers had seen a fall in revenue of between 20 and 40 percent, and the hotel industry was seeing reservations down 15 to 25 percent.
Restaurants, depending on their location, had seen takings collapse by between 20 and 50 percent.
"The impact is severe and ongoing," Le Maire said, emphasising it was nationwide, although Paris, after riots and looting in some of its most upmarket districts on Saturday afternoon and evening, was particularly affected.
The ministry was not able to say what sort of impact the unrest would have on gross domestic product, but having hoped for a pick-up in the fourth quarter on the back of rising consumer spending, that now appears less likely.
Holiday season shopping has started poorly, according to industry group Federation du Commerce et de la Distribution, which expects a s lump in hirings and a transfer of shopping to e-commerce, mainly on Amazon, a spokeswoman said.
Amazon was not immediately available to comment but CDiscount, the e-commerce arm of retailer Casino, attributed the record number of visits to its websites partly to "demonstrations or blockades organised outside some shops."
Market data aggregator Nielsen said on Monday retail sales had contracted during three days of nationwide protest since November 17, and had struggled to recover in between.
It said supermarket sales had plunged 35 percent on day one on November 17 and 18 percent on day two, November 24.
PSG call off Saturday game amid fears of more protests
Paris St Germain have postponed Saturday's top-of-the-table clash against Montpellier amid fears the French capital could be hit by more social protests, the club said on Tuesday.
Police asked the league leaders to call the Ligue 1 game off three days after thousands of people rioted against President Emmanuel Macron and his squeeze on household spending brought about by tax increases on diesel.
PSG lead the French league with 43 points from 15 games and were due to play second-place Montpellier at the Parc des Princes on Saturday evening.
"We accept this postponement," coach Thomas Tuchel said. "We'll have to manage this situation to stay in shape before Belgrade. Security is absolutely important."