In October last year, the upper chamber of parliament defeated the government's plans to cut welfare benefits, a crucial part of its austerity drive.
Accusing peers of causing a "constitutional crisis" by exceeding their powers under Britain's unwritten constitution, the government asked Conservative lord Tom Strathclyde to review their role.
Strathclyde's report in December recommended that the Lords lose their veto over so-called statutory instruments -- secondary laws that amend or flesh out existing Acts of Parliament.
But he said "we have no plans for now to introduce new primary legislation" to enact reforms.
The decision reflects conclusions of the Commons constitutional affairs committee, which said in May that Strathclyde's proposals would be an "overreaction and entirely disproportionate".
It noted that the House of Lords -- made up of 812 religious leaders, hereditary and appointed members -- had only used its right to block secondary legislation five times in the past 50 years.
The pro-European Liberal Democrat party has threatened to vote against the start of Brexit negotiations unless the government promises a second referendum on the terms of exit before Britain leaves the EU.
While the Lib Dems have only eight MPs in the Commons, they could cause trouble in the Lords, where they have 104 members.
Former business leader and independent peer Digby Jones said the decision by Prime Minister Theresa May to back down on reforms considered by her predecessor David Cameron was a "big mistake".
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