The iconic Grade I-listed structure was set to be demolished by Network Rail, as part of a massive redevelopment masterminded by Grimshaw Architects, and had the full backing of English Heritage (EH).
But the structure will now be restored to facilitate the construction of Crossrail's infrastructure.
In a statement, Network Rail said: 'The planned work, which would have involved the development of Span Four and Red Star deck, will now be postponed.
'Although a final funding decision is yet to be made on Crossrail, the potential scale and timing of that project means it would be inappropriate for Network Rail to commit to phase two of the Paddington redevelopment.
'Network Rail will undertake sufficient remedial works to the Span Four roof and structure.'
The news will humiliate EH which, despite publicly backing the demolition, now 'welcomes the decision to postpone plans'.
In a statement EH said: 'We look forward to supporting Network Rail's work on the repair of Span Four for which we will be providing expert conservation advice.'
The regeneration project now appears to be doomed, as any possible work will not start until at least 2013.
The news has been especially welcomed by conservationist group SAVE Britain's Heritage, which has been campaigning to save the structure.
SAVE's secretary Adam Wilkinson said: 'We are delighted by the decision and excited by the prospect of it being restored.
'It will once again be a truly magnificent space, returning Paddington to its status as a world-class station. Once Crossrail is completed, there will be no operational reason to demolish this handsome Grade I-listed structure.'