In a letter to Republican House Speaker John Boehner last Friday, Attorney General Eric Holder said that the Food and Drug Administration would go back to the drawing board to develop the ads, as required by legislation passed by Congress in 2009.
Cigarette manufacturers, however, sued to prevent the ads from appearing on the packaging for their products, saying such a move would curtail free speech rights. In August, a federal court struck down the requirement as unconstitutional.
The Justice Department was facing a deadline on whether to ask the Supreme Court to review that ruling.
"The Department of Justice in this case has vigorously defended the constitutionality of the graphic warnings," Holder wrote in the letter notifying Boehner, who is a smoker. Holder said the deadline for an appeal prompted the new approach.
Many other nations have for years used graphic images to try to deter smokers.
The FDA has argued that the images of rotting teeth and diseased lungs are accurate and necessary to warn consumers - especially teenagers - about the risks of smoking.
On Tuesday, the FDA used a blog posting to say the agency "will undertake research to support a new rulemaking consistent with the (2009) Tobacco Control Act."
(Additional reporting by Toni Clarke; Editing by Paul Simao)