After holding an emergency meeting on Friday night, Lam addressed the press on Saturday: "The government has decided to suspend the legislative amendment exercise, restart our communication with all sectors of society... and listen to different views of society.
"We have no intention to set a deadline for this work and promise to report to and consult members of the legislative council panel on security before we decide on the next step forward, " she explained.
Strong crticism from all sides
Lam, who is appointed by a committee stacked with Beijing loyalists, had previously refused to consider abandoning the bill, despite months of criticism from business and legal bodies.
Hong Kong operates under a "one country, two systems" principle, which ensures that it keeps its own judicial independence, its own legislature and economic system, but protesters say this freedom is under threat.
Although decided on a case-by-case basis by Hong Kong courts, critics fear the extradition law could be used to target political opponents of the Chinese state and furthermore damage the city's reputation as a safe business hub.
Lam's about-face comes after tens of thousands of protesters were dispersed by riot police firing tear gas and rubber bullets on Wednesday, in the worst political violence since the 1997 handover of Hong Kong to China.
Tensions are still running high with protest organisers calling for a full withdrawal of the bill, not a postponement. They are planning another mass rally on Sunday.
Calls to resign
James To, a lawmaker from the city's pan-democrat camp, called on Lam to step down.
"The credibility of our chief executive has already been written off, it's a kind of government that cannot have any credibility to rule anymore," he told reporters.
Lam said she had no plans to step down, and defended the need to overhaul the city's extradition laws and retained the support of China's central government.