Unions said on Wednesday afternoon that the government had finally agreed to allow a demonstration on Thursday, after the police had banned it earlier that morning.
"After tough talks with the interior minister, the union and student organisations obtained the right to demonstrate on a route proposed by the interior ministry," Philippe Martinez of the far-left CGT union told a news conference.
The government also gave the go-ahead for a demonstration next Tuesday, on the eve of a Senate vote on the government's hotly-contested labour reforms, Martinez said.
He was speaking on behalf of seven unions and student groups that had called Thursday's demonstration.
The agreed route will cover 1.6 kilometres (one mile) near the centre of the French capital.
Interior Minister Bernard Cazeneuve is set to speak to the press on Wednesday afternoon.
The earlier ban had been announced by Paris police who said they feared the march would once again descend into violence.
The ban was met with outrage, not least by France's politicians.
Far-right leader Marine Le Pen called the ban a capitulation to the masked protesters known as "casseurs" (breakers). In a tweet, she called the move a "serious violation of democracy".
Dissident Socialist MP Christian Paul condemned the ban as an "historic error".
"This is without precedent," he told the BFM TV channel. "I know there are constraints when it comes to maintaining public order, but the freedom to demonstrate is fundamental.
"We are within a hair's breadth of reaching a compromise on the labour law and that's when the prime minister chooses to harden his position even further," said Paul, who heads the left flank of the Socialists in parliament.
Another Socialist MP Karine Berger took to her Twitter account to denounce the move adding she "didn't recognize her country, or her party".
Former justice minister Christiane Taubira tweeted that the liberties of the French public "were precious, and more effort needed to be made to protect them".
Green party MP Esther Benbassa asked on Twitter "when thinking was going to banned" while the party's spokesman Julien Bayou said the ban was "a scandal".
Even former rightwing president Nicolas Sarkozy spoke out on Tuesday against a possible ban, saying it would be "unreasonable".
Meanwhile members on the extreme left said that they would still march on Thursday if the unions decided to go ahead with the demonstration.
The controversial labour bill is currently before the Senate, which will vote on it next Wednesday.
Unions have already called for demonstrations on the eve of the ballot.
They are furious the government rammed the reforms through the lower house of parliament without a vote.
President Francois Hollande, who faces a re-election bid next April, had hoped for a signature reform to reverse his approval ratings, which are among the worst of a modern French leader.