Civil liberties campaigners are celebrating after Nick Clegg vetoed the controversial 'snooper's charter'.
The deputy prime minister said plans to monitor records of people's internet use was "not going to happen" with the Lib Dems in govermment.
Responding to his comments, made in his weekly radio phone-in, campaign group Liberty said: "If the Snoopers Charter really is dead, that's cause for significant celebration and relief.
"People live more and more of their intimate lives online and it was outrageous to suggest surveillance of the entire nation.
"Credit to all those in parliament and beyond with the imagination and courage to block this terrifying plan."
The Home Office declined to comment on what Clegg comments. Discussions are still going on to try to thrash out an agreement ahead of the Queen's Speech.
Clegg has mounted staunch resistance within Government to measures included in home secretary Theresa May's proposed Communications Data Bill which would allow the storage of details of the history of website visits and social media contacts for each internet user.
Reports this week suggested that May has redrawn the legislation with significant concessions in the hope of getting it included in the Queen's Speech on May 8.
But Clegg indicated he is ready to accept only minor technical changes - such as ensuring that every mobile device has its own unique IP address - and does not regard the large-scale retention of internet use records in a "treasure trove" of data to be mined by security officials as either "workable or proportionate".
Speaking on his weekly Call Clegg phone-in on LBC 97.3 radio, he said: "What people have dubbed the 'snoopers' charter' is not going to happen.
"The idea was that the Government would pass a law which means there would be a record kept of every website you visit, who you communicate with on social media sites. That is not going to happen. It is certainly not going to happen with Liberal Democrats in Government.
"We all committed ourselves at the beginning of this Coalition to learn the lessons from the past, when Labour overdid it, trying to constantly keep tabs on everyone. We have a commitment in this Coalition Agreement to end the storage of internet information unless there is a very good reason to do so.
"I have spoken to senior police officers and people from the security services. Of course we need to support them. They have got very significant powers already which I support them in deploying to go after criminals to keep us safe.
"There are technical issues about how, as technology changes, we have got to update that. For instance, we have all got more and more mobile devices but there aren't enough IP addresses to go around and we need to straighten that out.
"That is something the Government will do and will work with the police and others to do so.
"But this idea of a snoopers' charter, as it's been dubbed, where a law is passed where there is a record kept of all the websites you visit and who you communicate with on social media sites, I'm afraid that is not either necessarily workable nor proportionate, so it is not going to happen."