Georgian President Salome Zurabishvili vetoed the draft "foreign influence" or so-called "Russian law" that provoked massive protests for weeks.
The law had also invited sharp criticism from Brussels as it warned that the particular measure would vandalise Tbilisi's European aspirations.
"Today I vetoed a Russian law. This law is Russian in its essence and spirit," she said in a televised statement, speaking about the bill that critics describe as resembling Russian legislation used to silence dissent.
"It contradicts our constitution and all European standards, therefore it represents an obstacle to our European path," she added.
Zourabichvili had previously stated that she would veto the bill after saying that she considered the law “unacceptable.”
However, her decision can be rescinded by a second vote in parliament, which Georgia's ruling party and its allies majorly control.
As per TASS reports, the president said that her veto was legally sound and that it would be handed over to parliament on Saturday (May 18).
"This law must be repealed," she said.
Mass protests erupted across the Georgian capital Tbilisi over the past month after the first reading of the draft law was passed in parliament.
The so-called ‘foreign agents’ law requires organisations, including media outlets, nonprofits and other non-governmental organisations receiving more than 20 per cent of their funding from abroad to register as bodies “pursuing the interests of a foreign power.”
Since April, thousands of Georgians have staged near-nightly protests against the proposed legislation.
Earlier on Monday (May 13), hundreds of university students in the Georgian capital, Tbilisi walked out of classes and joined thousands of protesters opposing the bill.
Last week, several thousand protesters staged an all-night rally outside parliament but failed to prevent lawmakers from entering on Monday after the MPs managed to access the building from the back and pushed the bill through a parliamentary legal committee in less than two minutes.
The government, however, has argued that the law is needed to promote transparency, combat “pseudo-liberal values” promoted by foreigners and preserve the country’s sovereignty.
(With inputs from agencies)