The state Department for Children and Families said Tuesday that it was rescinding the policy before it could be put into effect for 15,000 poor residents receiving cash assistance each month.
The department confirmed its action in a statement to The Associated Press before making it public.
Legislators approved the withdrawal limit in April as part of a measure rewriting rules for cash assistance. The limit was designed to prevent benefits from being converted to cash for non-essential spending.
Questions from U.S. officials prompted concerns that the federal government might withhold funds from Kansas.
Lawmakers in June approved a follow-up measure giving department Secretary Phyllis Gilmore the authority to raise or eliminate the limit.