Shelter Scotland has abandoned its legal action against Glasgow City Council.
The charity had voiced its intention to take the local authority to court in October after claiming there had been failures in its homelessness service.
It had raised concerns over “gatekeeping”, maintaining the council had illegally denied people in need of a place in temporary accommodation.
However, after the Scottish Housing Regulator announced its inquiry into the council’s service last month, Shelter has hit pause on its legal action.
Graeme Brown, director of Shelter Scotland, said: “The inquiry from the Scottish Housing Regulator brings new hope that this grave injustice can be stopped without going to court.
“The regulator still has the option to replace the city council’s management team if they cannot show that they are capable of upholding their legal duty to guarantee safe temporary accommodation to every homeless person who needs it.
“We will be providing all our evidence to the regulator to assist with its inquiry and we will also return to court if necessary.
“I want to thank our supporters and ask them to stick with us until we see an end to the disgraceful practice of gatekeeping in Glasgow.
“As we announce our intention to withdraw from the court process at this stage, the campaign continues.”
A Glasgow City Council spokeswoman said: “Shelter’s legal action had no impact on the Scottish Housing Regulator’s decision and we welcome their move to abandon their court case.
“We are working constructively with the regulator in order to improve homelessness services and our door remains open to Shelter to engage positively with us.”