The Early Childhood Council has dropped a legal challenge to the way the government funds teacher pay parity.
The council had alleged the system discriminated against older female teachers and the gap between government funding and the cost of pay parity for senior teachers was unreasonable.
It said increased funding announced in last month's Budget could solve the problem so it was withdrawing the action.
However, the council warned a lot depended on the details of new policies.
They include a new system for funding pay parity, and rules that will accompany extension of the 20-hours subsidy to two year olds next year.
In a statement, the council's chief executive Simon Laube said the legal action had sent the government a clear message that it would be held to account.
"The new early learning investment promised in Budget 2023 means a key ground underpinning our legal action is set to be addressed. Now, it's up to the government to deliver and provide services with funding conditions that allows them to fully utilise this investment."
Laube said the council's focus was now on encouraging members to make submissions on the Pay Parity consultation which closes on Tuesday, as well as lobbying government to address the gap between teacher wage costs and the funding received by centres and looking at potential risks to the 20-hours policy that surprised the sector.