Wellington Mayor Celia Wade-Brown says strong opposition by Te Papa supporters to cutting funding by Wellington City Council was one of the reasons for a U-turn on the proposal.
Councillors voted 11-4 on Thursday to keep Te Papa's funding at $2.25 million.
The council earlier signalled it would reduced the grant by more than half, to $1 million.
Ms Wade-Brown says there were a number of reasons to keep the funding the same, including strong public submissions.
She says the council and Te Papa will be working more closely together in the future.