The capitulation came after the country's highest court last week slammed the provincial government for its failure to punish those involved in the Hindu-Muslim riots, after a local court exonerated 20 men, charged with killing 12 Muslims, for lack of evidence.
P.N.Lahiri, Gujarat's most senior bureaucrat informed the Supreme Court on Friday that the provincial government would amend its appeal against the acquittal of the 20 men and also seek their retrial.
In a stinging indictment last week, Supreme Court Chief Justice V.N.Khare had termed the state government's earlier appeal an "eyewash" and called on the the government to quit if it could not punish the culprits.
Gujarat is ruled by Prime Minister Atal Behari Vajpayee's nationalist Bharatiya Janata Party.
The Supreme Court's strictures followed an appeal by the independent National Human Rights Commission and a witness seeking a fresh trial in the case.
The killing of the 12 men in the city of Baroda was one of the most barbaric incidents during the riots which swept the state after 59 Hindu pilgrims were torched alive inside a train by a Muslim mob.
The riots left at least 1,000 people, mostly Muslims, dead.