Army chiefs refused to send in troops to end a two-week stand off involong 2,500 demonstrators after a police operation ended in violent clashes and the deaths of at least seven people.
Senior generals are believed to have over-ruled ministers and told them to peacefully resolve the protests which left more than 200 people injured.
Pakistan’s law minister then resigned and the government agreed to the protestors’ demands in a bid to end the protests.
Leaders of the Tehreek-e-Labaik group responded by calling off their action, prompting suggestions that the army was somehow involved behind the scenes.
Tehreek-e-Labaik , led by cleric Khadim Hussain Rizvi, is one of two new ultra-religious political movements to reach prominence in recent months.
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It campaigns to maintain Pakistan’s strict blasphemy laws and launched the protest after accusing law minister Zahid Hamid for changing the wording in an electoral oath.
The hardliners insist the words “I believe” which replaced “I solemnly swear” in a proclamation of Mohammad as the religion’s last prophet was blasphemy.
The government blamed the change on a clerical error and swiftly restored the original format.
Tehreek-e-Labaik spokesman Ejaz Ashrafi said: “Our main demand has been accepted.
“Government will announce the law minister’s resignation and we will end our sit-in today.”
The government climbdown will be seen as a major embarrassment for the ruling Pakistan Muslim League-Nawaz (PML-N) party ahead of elections next year and highlights the power of religious groups in the nuclear-armed nation of 207 million.
Political analyst Hasan Askari said giving in to the group’s demands had hit the government’s reputation and credibility.
He said: “These protests will have emboldened this group, and they are going to assert themselves and put up candidates wherever they can in the next general election, or at least they will oppose the PML-N.”
Law minister Zahid Hamid handed in his resignation to Prime Minister Shahid Khaqan Abbasi “to take the country out of a crisis-like situation”.
The opposition Pakistan Tehreek-e-Insaf (PTI) party accused the government of bungling the efforts to remove the protesters and called for early elections.