The announcement comes after demonstrators packed a park in Madrid on Saturday in a protest called by Spanish green group Ecologists in Action.
Organisers said over 2,000 people joined the rally which came as Spain is gearing up for regional elections in May. A government official gave a figure of 1,000.
The metro extension had initially called for cutting down 1,027 trees in a southwestern area known as Madrid Rio.
But on Monday Madrid's regional government said it had "halted the planned felling of trees" in the area and would modify the metro extension project.
The region is run by Isabel Diaz Ayuso, hardliner with the right-wing Popular Party (PP).
A change.org petition against the tree felling has so far been signed by nearly 54,000 people.
Ecologists in Action had filed a court appeal to block the works until the environmental concerns can be addressed.
It argued the planned metro route had undergone major changes "in order to have minimal impact on local traffic and keep the construction works away from public roads".
Trees generate huge benefits for cities through carbon dioxide retention and pollution filtration, while also reducing the "urban heat-island" effect, experts say.
Earlier this month, research published in The Lancet journal said planting more trees in urban areas to lower summertime temperatures could decrease deaths directly linked to hot weather and heatwaves by a third.
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