Minsters were concerned about legal action by Tottenham Hotspur over West Ham’s plan to by the Stratford stadium after the 2012 Games.
They feared the legal battle could continue for years, leaving the huge venue empty.
The Stratford stadium will remain as public property and will be leased out to a tenant after a tender process.
The statement from the Department for Culture, Media and Sport said: "The Government is committed to securing a legacy from the Olympic stadium, and wants to see it re-opening in 2014. The process to sell the stadium has become bogged down. We are acting today to end the legal paralysis that has put that legacy at risk. Ending the current sale process and looking for a leasehold solution will remove the current uncertainty and allows us to help secure the future use of the Stadium with more confidence."
The £50m plan to transform the 80,000 capacity stadium into a 60,000 capacity venue for sports, concerts and other events will now then be financed by the Olympic Park Legacy Company.
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