TBILISI, Georgia — Georgia’s Parliament on Friday voted down draft legislation that set off a political storm and mass demonstrations this week over fears the measure would push the small former Soviet republic back into Moscow’s orbit.

Lawmakers from the governing Georgian Dream party dropped the legislation that critics have called a Kremlin-inspired effort to undermine democracy by voting against it during its second reading, according to a statement on Parliament’s website. Despite fears that lawmakers will devise other ways to crack down on civil society, the decision on Friday, which had been telegraphed by the government, was met with cheers outside the building.

After the bill’s expedited initial approval on Tuesday, a crowd had gathered on the same spot. Chanting, “No to the Russian law” and “No to the Russian government,” some tried to storm Parliament but were met with riot police officers using water cannons, stun grenades and tear gas.

In Georgia, which lost territory to Russia in a painful war in 2008 after an invasion by President Vladimir V. Putin that has drawn parallels to the war in Ukraine, any association with Moscow is a politically combustible issue. In its statement about scrapping the bill, Georgian Dream blamed the opposition’s “lying machine,” which it said had attached a “false label of ‘Russian law.’”

The proposed law, “on transparency and foreign influence,” would have required civil society groups and news media outlets to register as “agents of foreign influence” if they received more than 20 percent of their funding from “a foreign power.” Failure to do so would have resulted in fines of up to $9,600.

Protesters raised concerns that the proposed law mimicked similar legislation in Russia, where it became a potent tool that helped the Kremlin purge civil society of many pro-Western groups.

Georgian lawmakers’ decision to vote it down on Friday drew criticism from Moscow. The Kremlin’s spokesman, Dmitri S. Peskov, said Russia’s view was that “some visible hand is trying to add anti-Russian elements” into Georgia. He pointed to the fact that President Salome Zourabichvili of Georgia had delivered an address about the issue on Thursday from the United States, where she was on a working visit.

“This can trigger provocations, and we watch this closely and with great concern,” Mr. Peskov said in a daily news briefing.

Within Georgia, the crisis had risked spiraling into a fight for survival for the Georgian Dream party, and activists on both sides of the issue suggested that the struggle was not over.

Critics of the proposed law said that although the quick U-turn was a clear victory for Georgia’s civil society, the fight over increased restrictions would continue. And Georgian Dream said in a statement that as soon as the “emotional background subsides,” the party would do its best to clarify “what purpose the bill served and why it was important to ensure transparency of foreign influence in our country.”

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