Following a judgement of ‘inadequate’ by Ofsted, Milton Keynes Council had been making plans to stop funding places at Eaton Mill nursery.
The council was obligated to cease funding, which is provided by the government under strict conditions.
A spokesman for the council said: "This is never an easy, or indeed pleasant, thing for us to do."
The inspection of Eaton Mill Nursery took place on December 20, 2017 and the report was published on February 3, 2018.
The council had planned to fund places until the end of March 2018 (eight weeks from the date of publication) to give parents and carers some time to work out what they wanted to do.
However, on Monday the council was informed that the nursery had been re-inspected. It is hopeful that the re-inspection will have a positive outcome.
The spokesman added: "We have therefore taken the decision to minimise the impact on parents and children and to continue to provide funding to bridge the gap until the new Ofsted report is published."