The country was the only EU member nation to implement such a measure.
The law came into effect in February but is now being suspended as the pandemic appears to be winding down.
Those who refused to get vaccinated faced fines of up to €3,600.
The law was described as an "encroachment of fundamental rights" by Austrian Minister Karoline Edtstadler, who siad the current relatively low risks posed by the virus failed to justify such a strong measure.
"After consultations with the health minister, we have decided that we will of course follow what the commission has said," Edstadler announced following a meeting of Austria's Cabinet. "We see no need to actually implement this compulsory vaccination due to the Omicron variant that we are predominantly experiencing here."
As seen elsewhere, Austria's surge in cases due to the Omicron variant did not result in a significant increase in hospitalisations.
To date, Austria has reported three million Covid cases among its nine million population, with 15,000 deaths attributed to the virus.
