Telford & Wrekin Council's senior cabinet members have decided to save Newport Library and First Point Services, announcing there will be a reduction in the savings needed at the library.
This will allow the council to continue to run a First Point service alongside a new self-service library facility.
Saving the First Point service and library, which will be subject to a review of operational arrangements, will mean the council has halved the level of savings it had originally planned to deliver, after listening to the views of local residents.
The decision to save the library was made following an extensive public consultation on budget savings proposals, which ended on February 7.
Councillor Liz Clare, Telford & Wrekin Council's cabinet member for leisure and culture, said: "We know that the First Point Service is an extremely valued community resource in Newport and, if it were to close, Newport residents would have to travel further than most to access council services.
"We have listened to what the community have told us and have changed our plans as a result."
Newport Library was one of six libraries facing the axe when Telford & Wrekin Council announced it needed to make £30 million worth of savings in two years.
So far Dawley Library has been saved from closure, with the running of the library set to be taken on by Great Dawley Town Council.
Details of an agreement with officials at Telford & Wrekin Council are being finalised.
A deal is also on the verge of being struck between Hadley & Leegomery Parish Council and Hadley Learning Community to save Hadley Library.
The borough council is continuing to hold talks with a number of town and parish councils, including Newport Town Council to explore whether it can work together to reduce the impact of other savings across a range of services.
Councillor Shaun Davies, Telford & Wrekin Council's cabinet member for business, neighbourhood and customer services said: "We are doing all we can to protect our frontline services.
"However, our financial position is such that we do need the community and town and parish councils to help us out.
"I hope to continue my discussions with Newport Town Council to see if we can work together to help limit the impact of other savings."
Councillor Lee Carter Telford & Wrekin's cabinet member for finance and service delivery said "We would obviously prefer not to be in a position where we have to cut or close anything but the government has left us with little choice.
"We are dealing with a £30m cut to our grant. However I am delighted that we have been able to make these changes which means we can retain the library and First Point Service in Newport."