The cuts of about $500 a month were first reported by Radio-Canada/CBC on Tuesday. The Defence Department said the cuts were being made because Afghanistan was not deemed as dangerous as it used to be.
But the Prime Minister's Office on Wednesday said it would reverse the decision, which it said originated with bureaucrats.
"For your information, it is an interministerial panel of civil servants that made this decision, and we are going to reverse their decision," a PMO spokesman said in French in an email to Radio-Canada Wednesday morning.
But in a later email to CBC News, PMO spokeswoman Julie Vaux said, "Officials make these decisions based on a number of considerations. [The] government has asked officials to re-examine this decision."
That message was later echoed in statements by Veterans Affairs Minister Steven Blaney and Defence Minister Peter MacKay.
Jay Paxton, a spokesman for MacKay, explained that the government has asked the panel to re-examine its decision and come back with other available options.
The proposed cut goes into effect April 15.
The interministerial panel meets four times a year to evaluate deployed missions and can decide to cut danger pay, officially known as "Hardship and Risk" allowances, if conditions on the ground improve, according to Kelly Rozenberg-Payne, a Defence Department spokeswoman.
The committee decided conditions had improved in Afghanistan, since soldiers were no longer going on combat missions, she said in an email.
NDP defence critic Jack Harris said Canadian soldiers are still serving on a dangerous mission, pointing to a "recent uptick" in attacks on NATO troops. And he took issue with the government's response to the controversy.
"It's inexcusable to blame bureaucrats for this move. The minister needs to take full responsibility and commit to protecting the benefits our soldiers receive when they are serving on dangerous missions aboard," Harris said in a statement.
There are currently 930 members of the Canadian Forces in Afghanistan on a tour that ends in late summer. They make up the bulk of the total 980 Canadian Forces personnel currently entitled to danger pay allowances, DND said.
Canada has committed to providing troops to support the training of Afghan soldiers until March 2014.
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