The former Labor-Green government had imposed a ban due to begin next year.
Primary industries minister Jeremy Rockliff said the chemical would not be phased out until a viable alternative was available.
"One of the many challenges facing our farmers is the significant pasture and crop losses caused by some of our abundant wildlife – particularly wallabies and possums," Mr Rockliff said in a statement.
Farmers have applauded the move, saying they lose on average a quarter of their income to browsing animals.
"Animal rights campaigners have suggested fencing is the solution (but) it is enormously expensive and, in many areas, physically impractical," Tasmanian Farmers and Graziers Association boss Jan Davis said.
Green groups, though, reacted angrily to the announcement, saying it went against community sentiment.
"Resorting to 1080 poison is the cheapest, nastiest and cruellest way to prevent browsing by native animals," state Greens leader Kim Booth said.
The poison, also known as sodium fluoroacetate, is widely used to bait foxes in Australia.
via Tasmanian govt scraps 1080 pesticide ban | The Australian.