The Labour-run council has issued £1.3m fines since August when traffic was banned from Coppergate and Lendal Bridge during the day.
Last week, a traffic adjudicator ruled the roads did not qualify because bus lanes and signage were inadequate.
But James Alexander, the leader of City of York Council, said "the principle of the trial" had been right.
Residents, tourists and businesses had complained about the restrictions from the outset.
Councillor Keith Aspden, Liberal Democrat leader, said: "It was a botched trial from the start which has made congestion worse and damaged local businesses."
In a statement on Monday night, Mr Alexander said lawyers had confirmed the implementation of the trial in August "was legal".
He denied its purpose had been to generate revenue, and said it had been aimed at reducing traffic over the bridge and through the city centre.
"It is clear, however, that the trial has been polarising and we need greater consensus amongst residents and businesses over measures to tackle congestion," Mr Alexander said.
He said he wanted an independently-chaired cross-party commission to look at the data and come up with more consensual suggestions for tackling congestion.
Traffic restrictions on York's Lendal Bridge will be lifted on Saturday, the council has confirmed.