French unions and students still plan to hold nationwide marches Tuesday even after President Jacques Chirac threw out the controversial youth jobs law.
Student leaders call Mr. Chirac's decision a victory, but say they must stay vigilant until parliament passes a replacement law.
Prime Minister Dominique de Villepin, who pushed the old law through parliament, says the new bill would include financial aid to employers who hire disadvantaged youths.
He said the old bill was aimed at cutting youth unemployment, but was misunderstood.
It would have allowed companies to hire young workers for a two-year probationary period. But opponents said it would have let bosses fire them for no reason.
The law triggered weeks of labor strikes and student protests, some of which turned violent.
France has one of Europe's highest rates of unemployment at about 10 percent, and 22 percent for workers under the age of 26. Some information for this report was provided by AFP, AP and Reuters.