Instead, anyone wearing a burqa or niqab will be asked to remove their facial covering "temporarily" to allow identification by Parliamentary security services.
In a statement released this morning by the Department of Parliamentary Services, said this will enable security staff "to identify any person who may have been banned from entering Parliament House or who may be known, or discovered, to be a security risk.
"Once this process has taken place, visitors are free to move about the public spaces of the building, including all chamber galleries, with facial coverings in place."
The plan to separate women in traditional Muslim clothing from the rest of the public in Parliament was first discussed on October 2 in response to moves by the Liberal senator Cory Bernardi, Nationals MP George Christensen and Palmer United Party senator Jacqui Lambie to ban the garments being worn in public spaces.
However, the plan was condemned by human rights organisations as discriminatory from both a human rights and a racial perspective.
Race discrimination commissioner Tim Soutphommasane said the plan, which was never implemented, would cause Muslim women treated differently to non-Muslim women.
"No one should be treated like a second-class citizen, not least in the Parliament," he said. "I have yet to see any expert opinion or analysis to date which indicates that the burqa or the niqab represents an additional or special security threat.”
Senate President Stephen Parry told a senate estimates committee meeting this morning that the plan to segregate women wearing the burqa and the niqab came about after the Office of the Speaker and the Usher of the Black Rod received information about a group of men who sought to disrupt question time in the House of Representatives while wearing the garments.
The decision to drop the plan came after a meeting between Parry and Speaker Bronwyn Bishop yesterday. The new interim measures, Parry said, would provide enhanced security and identification at the entry to Parliament House.
"This will be by way of identifying each person as they enter, by their facial features, and by enabling persons with facial coverings to move from that point freely into the public portions of the building, including the chamber galleries.
"An inhibiting factor prior to today was that visitors could enter the building with facial coverings and never be identified, particularly if they were a person who had been banned or a person who was known as a security threat."
Despite the back down, opposition spokesman Tony Burke told reporters both Mt Parry and the Speaker should explain why the segregation was considered in the first place.
"It's been an absurd fortnight as we've waited for a back down that logically had to occur and... both the Speaker and the President need to explain why on earth this farce was initiated," Mr Burke said.