The new government has abandoned a battle over a High Court ruling that found Aboriginal people were not "aliens" under the constitution and, therefore, could not be deported.
The court issued its landmark ruling in a four-three decision in 2020.
That case had been brought by two men, Brendan Thoms and Daniel Love, who were born overseas and faced deportation after stints in jail.
Mr Thoms was released from immigration detention immediately after the court issued its judgement.
Mr Love was already free, as the government had reversed its decision to revoke his visa.
The High Court's 2020 ruling said Aboriginal Australians had a "special cultural, historical and spiritual connection with the territory of Australia, which is central to their traditional laws and customs and which is recognised by the common law".
"The existence of that connection is inconsistent with holding that an Aboriginal Australian is an alien within the meaning of section 51(xix) of the constitution," the decision read.
The court found immigration laws did not apply to Mr Thoms, who was a recognised native title holder.
However, a majority of High Court justices were unable to agree on Mr Love's status as a member of the Kamilaroi people, and could not decide whether he was an alien who was residing in Australia unlawfully.
Morrison government wanted aliens decision overturned
A later Federal Court case, involving New Zealand-born Shayne Montgomery, prompted the former Morrison government to challenge the High Court's original aliens ruling.
Mr Montgomery claimed kinship with Australian Aboriginals through adoption.
During the High Court challenge in April, Mr Montgomery's legal team said he had been detained illegally and the court should throw the Commonwealth's case out.
The Federal Court had earlier found that Mr Montgomery's visa should not be revoked, as the High Court's aliens ruling protected him.
However, the Morrison government then used the case to challenge the entirety of the original decision.
Since the four-three ruling in 2020, two of the judges who had backed the majority decision had been replaced, leaving a potential opening to review the ruling.
The court had not yet delivered its decision, but that became academic on Thursday when new Attorney-General Mark Dreyfus discontinued the case.
"Love and Thoms has been the law of the land for more than two years now and the Albanese government will not seek to overturn [it]," Mr Dreyfus's spokesman said.
Mr Montgomery's lawyer, Arti Chetty, welcomed the development.
"Mr Montgomery has lost years of his life fighting to remain with his children, his family, including his parents and siblings, and his community," Ms Chetty said.
"We are incredibly relieved for him that this ordeal is over.
"We are pleased that the Attorney-General has withdrawn the case.
"It may have led to Mr Montgomery being taken away from his community, preventing him from fulfilling his obligations as a knowledge holder, a teacher and mentor for the young people in the Mununjali community."
Mr Montgomery's visa was reinstated two weeks ago.
