The scheme aimed to improve the punctuality of bus services and reduce congestion along the A259 Seaside in Eastbourne.
It will now not go ahead in its current form while East Sussex County Council redesign the plans following consultation with businesses and residents.
Businesses said the planned route would get rid of parking and affect trade.
DB Domestic Appliances was one of the businesses that were up in arms about it.
Jodie Atherton, saleswoman, said: “We’re thrilled by it, they’re not going to continue with the plans as they are. We were never against change or the eco-side of it, the bus service does need improving.
“The space on the road was only wide enough for a bus lane without any cycling and two lanes and traffic. There would be no space for parking.
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“We’re really pleased that if they went ahead with the plans, they will have to speak with the residents and businesses. We all have that voice now.
“As residents of Eastbourne, we actually get a say of what happens to Eastbourne.”
Conservative MP for Eastbourne Caroline Ansell said she is arranging a meeting with the county council in February for the businesses and residents to discuss future plans for the scheme.
The plan is part of the £41.1 million bus service improvement plan which was a government grant.
Highlighted in green was the proposed bus lane plan
A county council spokeswoman said: “Changes to bus priority along the seaside corridor could make a significant impact on journey times in the area, helping to tackle congestion and supporting a more reliable bus service for the approximate 4,000 passengers travelling in the area each weekday.
“While there are benefits from introducing these new measures, it is important that we balance the benefits with the needs of the local community.
“The scheme will now not go ahead in its current form and we will work to identify what measures we can develop and deliver in consultation with the local community, businesses, bus operators and the Department for Transport.”
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