Manchester City Council will not be pursuing legal action against the government over its abandonment of the super-casino project.
Instead, it will work with a task force exploring ways of generating the same number of jobs a casino would have brought to east Manchester.
Leader Sir Richard Leese said there was more to be gained from working with, rather than against, the government.
Opposition leaders accused Sir Richard of „putting Labour before Manchester“.
The city was the surprise choice for the super-casino when it was awarded in 2007, beating Blackpool and the O2 arena in London.
The project was intended to drive urban regeneration close to Manchester City Football Club’s Eastlands stadium.
But it was scrapped by the government in February – provoking anger and disappointment in the city.
In the aftermath, the council said it was considering pursuing a judicial review of the decision – but has now abandoned the position.
Sir Richard Leese delivered the news following talks with Gordon Brown in which he assured city leaders he would try to drive forward the regeneration of the area.
„We are very pleased to have his backing but will continue to put pressure on government to ensure the promises are delivered for the people of east Manchester,“ he said.
„The city council will do everything it can to protect the interests of the city and its residents and we are convinced that there is more to be gained for Manchester by working with government than from confronting them in the court room.
„As a consequence the city council will not be pursuing legal action.“
But Simon Ashley, leader of the council’s Liberal Democrat group, accused the council leader of „caving in“.
„He has put the Labour party’s interest before Manchester’s“, said Mr Ashley.
„Gordon Brown’s Labour government hasn’t delivered a single new job for east Manchester, and Richard Leese has said that is just fine with him.“
The task force, led by Hazel Blears and made up of eight cabinet ministers, will meet every two months to discuss alternative regeneration plans.
Ideas floated so far include an Olympic standard BMX centre, a national skills centre for hospitality management and a digital/animation business cluster.
The relocation of some government functions to the area is also a possibility.