The Blue Hills Federation said it had agreed to end plans which would have seen pupils moved from Newcastle CE Primary School in the village of Newcastle upon Clun to one of its other schools, either Clunbury or Bucknell primary.
Parents have welcomed the u-turn, with Barry Swancott, who has two children at the school, saying they would look forward to discussing the future of the school with the federation.
The farmer said: "The parents of Newcastle CE Primary School are delighted at the news that the Blue Hills Federation Board of Governors have resolved to withdraw the proposal for a prescribed alteration published on March 3.
"We are pleased too that the governors have moved quickly to engage with parents and the wider community with a view to finding a way to secure this outstanding little school for the future."
The federation had proposed moving all 22 pupils in the school to another site.
But, in an update on Tuesday, they said that process would be stopped.
The statement said: "The governing body of The Blue Hills Federation has agreed unanimously to call a halt to the consultation process that was launched on March 3 regarding the transfer of education provision from Newcastle CE Primary School to one of the other two sites in their federation of schools, namely Clunbury CE Primary School and St Mary’s CE Primary School in Bucknell.
"The process was originally due to run until March 31."
However, the update suggested that the future of the school would not be secure until more pupils joined.
The statement added: "Newcastle CE Primary School has had low pupil numbers for several years. The number of children available in the catchment area has dropped significantly and the school has relied heavily on attracting children from outside the catchment area for a number of years.
"Demographics within the wider local area show a decreasing number of children, which is having further impact on the school.
"The governing body will now seek to fully engage with parents and the community in Newcastle over the next few months with a view to attracting additional pupils to the school for the start of the new academic year starting in September 2023.
"Increasing pupil numbers above current forecast numbers is critical in ensuring that provision at the school is both educationally and financially sustainable, particularly in the medium to long term.
"In making this decision, the governing body is quite clear that if the numbers don't materialise then, while seeking to maintain a good level of education for the pupils on roll in September, they will review the position and consider the need to initiate a statutory consultation process regarding the future of the school."
Parents and members of the community have been invited to a meeting at Newcastle CE Primary School, to discuss plans to support the sustainability of the school, at 7.30pm on Monday, March 20.