Work had already begun turning the disused line into a 500-metre bitumen track linking Rochdale Road, Stainland Road and Saddleworth Road, West Vale.
But councillors, who had not granted permission for the council project, ordered it to stop – because they fear the track, with no lights and out of public view, would attract anti-social behaviour and cause environmental damage.
Now Sustrans, a national cycling organisation which was paying for the work, will pull their £100,000 funding from the district.
Peter Coles (Lib Dem, Ludd Ft) said: "It would be a shame to lose this money but we have to start listening to what people want – and people living near this track seem unanimous in not wanting it."
Nearby residents feared the path would become a haven for under-age drinkers, with a police report suggesting a planned fence on the viaduct could encourage youths to throw stones at oncoming cars. It suggested lives may be lost.
Helen Woodworth, of Bank Field Grange, Greetland, added: "It is so arrogant of the council to begin this work without even getting planning permission. If they'd consulted us they would have known the only communities this would link are two communities who hate the idea."
A spokesman for the project apologised for not waiting.
But he said delays may have meant not getting the cash from Sustrans, which was to be matched by £20,000 from council coffers.
He said: "The view was taken we should start the preliminary work to make sure we met the Sustrans deadline.
"They are happy to undo the work."
Sustrans, which hoped the route would form part of a larger National Cycle Network, said it may appeal the decision.
The Grade Two listed viaduct was built in 1874 for the Lancashire and Yorkshire Railway and has been redundant for decades.