Southland Fish and Game chairman Graeme Watson described it as a "wise decision" and offered to work with the council on development of the Mararoa route, which the organisation had been promoting all along.
The 175km trail will eventually link Kingston with Walter Peak Station, on the western shore of Lake Wakatipu, via the Mavora Lakes and the remote Von Valley.
Stage One, from Kingston to Mossburn, opened in November 2014.
In March 2015, the council was given consent to build part of stage two of the cycleway, about 30km of which would go through the Oreti Valley, beside the headwaters of the Oreti River.
A month later Fish and Game New Zealand appealed that decision to the Environment Court to protect the valley’s pristine outstanding features and internationally recognised brown trout fishery.
The Environment Court upheld the appeal, but the SDC then appealed the decision to the High Court in December.
This week, Southland Mayor Gary Tong said the council would withdraw the High Court appeal and would pay Fish and Game $175,000 in costs.
Further, it was investigating completing the trail as a "Heartland Ride". That would use the Centre Hill and Mavora Lakes Rds to complete the trail from Centre Hill to Walter Peak.
Mr Tong said that provided the council with a ‘"holding option" to allow the trail to be completed and marketed as a ‘‘complete ride’’ and consider how to fund and develop it to a Great Ride standard.
"We considered three options of doing nothing, the Heartland Ride and the Great Ride.
"We cannot do nothing, as we have contractual agreements with funders, including central government, to complete a Great Ride from Kingston to Walter Peak.
"We don’t believe we can develop a Great Ride at this time because of the costs, which are estimated to be in the range of $3 million to $6 million," he said.
Mr Watson said Fish and Game was "delighted this long, drawn-out battle is now behind us and we can move on".
"We now have the opportunity to shift from what was threatening to become an embarrassing debacle to a positive development which will provide economic benefit to Southland ... it is time for all parties to co-operate and build something the region can be proud of."
He said the organisation was happy to work with the council to develop a new route for the cycle trail down the nearby Mararoa Valley.
Southland Fish and Game manager Zane Moss said, "It’s regrettable that it’s cost both sides so much time and money and effort and now we’re at the position where we hoped we would have been able to get to right from the start, but, that’s all behind us now."
