It would not make sense to continue with a court case against "The Spear" painting, which depicts President Jacob Zuma with his genitals exposed, the ANC said on Wednesday.
"Indeed, we are no longer taking the Goodman Gallery to court. We are no longer taking City Press to court," said African National Congress spokesperson Jackson Mthembu.
He was speaking at a joint media briefing between the ANC and the Goodman Gallery, announcing a settlement agreement on the controversial artwork.
Mthembu said now that a settlement had been reached, the court action in the High Court in Johannesburg was no longer necessary.
"There is no need for us to continue taking City Press to court, or the Goodman Gallery to court. It would not make sense," said Mthembu.
Goodman Gallery director Liza Essers said the painting would not be displayed in the gallery because it had been defaced.
The settlement agreement with the ANC did not include an agreement on removing the picture from the Goodman Gallery's website.
However, she said the image would be taken down from the website at some point.
The ANC went to court to get the painting removed from the gallery, and also took the City Press to court because it had published a picture of the painting on its website.
Meanwhile, the Film and Publications Board was expected to decide by the end of the week on whether the painting should be classified.