North reaction: Northern parties have welcomed the decision by Northern Secretary Peter Hain to abandon the bill, which would have allowed the return of paramilitary fugitives, the so-called "on-the-runs" (OTRs).
Victims groups, the Human Rights Commission and the Police Federation also welcomed the decision.
DUP deputy leader Peter Robinson described the Bill as "one if not the most repugnant piece of legislation ever to be placed before parliament".
"Had the Bill become law, it would have caused untold hurt to the innocent victims of terrorist violence who would have been faced with the prospect of the people who killed their loved ones literally getting away with murder," he said.
Sinn Féin had reversed their decision to endorse the Bill. Party leader Gerry Adams described the legislative proposal as "unacceptable" and a "major breach of what was agreed at Weston Park".
He also described it as a "serious act of bad faith by the British government".
"The issue of OTRs must be resolved. Responsibility for this rests with the British government." Mr Adams added.
UUP leader Sir Reg Empey said: "It seems that the government has at last seen sense. This hideous piece of legislation should never have seen the light of day in the first place and was a massive insult to the victims of terrorist violence who have yet to see justice."
SDLP leader Mark Durkan, who had opposed the Bill from its conception, said: "I want to be reassured, however, that it will not be recycled in any way.
We want to know that it has been abandoned, not just parked until a later date."
Mr Durkan believed that the legislation did not "leave the past behind on a moral basis". He said their collective task must be to find an agreed way of leaving the past behind, one that takes account of the rights of victims, one that allows for truth, recognition and remembrance.
The Alliance Party used the decision by Mr Hain to urge the government to deal with OTRs "in the proper way - via inclusive talks" .
The Northern Ireland (Offences) Bill had included a clause that would exclude members of the security forces from prosecution for crimes committed before 1998. Mr Terry Spence, secretary of the Police Federation for Northern Ireland, said: "It was a victory for common sense and decency.
"I suspect that the government was wrong-footed by our clear stance that including the police and military personnel within the scope of the legislation was an unworthy trade off and an insult to the police and military services."
The Northern Ireland Human Rights Commission also welcomed the announcement. Prof Monica McWilliams, the chief commissioner, said she also welcomed the sensitivity shown by the NIO in responding to the widespread criticism of the Bill."
She said the proposed legislation was incompatible with international human rights.
Victims group, Families Acting for Innocent Relatives (Fair), said it was "delighted that Secretary of State Peter Hain has announced the scrapping of the nefarious 'on-the-runs' legislation". The group's spokesman, William Frazer, said the government's attempt to further buy off Sinn Féin/IRA had backfired - with democracy and human rights triumphing in the end.
Paul O'Connor, from the Pat Finucane Centre in Derry, said they were "delighted" that the legislation had been dropped.