Launched in February by a group including author David Malouf, the petition drew support from expats including Peter Carey, Nick Cave and James Wolfensohn, international authors such as Ian McEwan and Margaret Atwood, and many local library users.
Dr Byrne announced on Wednesday that after listening to the opposition he had reversed the plans to remove researchers and books from the 1910 Mitchell Reading Room.
Writer David Malouf petitions fiercely over the Mitchell Library changes. Photo: Wolter Peeters
"We have been listening to the contrary arguments since November and we have come up with an alternative plan that addresses everything that has been expressed," he said.
"It's clear that people love the library overall and love the Mitchell building and, within that, love the Mitchell Reading Room."Mr Malouf said, "Everybody is a winner here. I was impressed by the really imaginative and elegant solution that allows us all to go back to supporting fully a great institution."
Rather than moving researchers to a separate room, the new plan almost triples their space at the back of the Reading Room to seat about 40 people behind a glass wall, which will create a quieter, more secure environment.
"The use of the special collections - manuscripts, artworks, maps and so on - and Mitchell collection books will continue in the grand Reading Room, where it is at the moment," Dr Byrne said.
Books and card catalogues that were moved to the Macquarie wing will return, while the rest of the room will remain for the general public with their own laptops and reading matter.
Researchers can also request delivery of other books to the Reading Room via the new $1.2 million online catalogue, instead of going to the Macquarie wing.
Discontent built after Dr Byrne launched a $25 million fundraising campaign in December to "revitalise" the Mitchell, opening more heritage rooms to the public, restoring the Reading Room to its pre-1988 public role, and adding a rooftop restaurant.Malouf and writers Evelyn Juers, Geordie Williamson and Sally McInerney created the petition and demanded a public meeting that was refused.
Mr Malouf said: "The library was in danger of losing a lot of its formal friends and a lot of potential donors and people who would think again about leaving things to the library."
Ceridwen Dovey, a young Sydney writer, expressed the widespread feeling in her petition comment: "The Mitchell Reading Room is a national treasure, and what makes it such a special, inspiring place to work, research and write is that it is filled with real books.
"The sense of history and place is palpable. It is a rare place - in this modern, hyper-networked world we live in - for quiet, profound, uninterrupted thought. Please don't change it!"
Mr Malouf said rethinking the plans was "a really brave move" and would inspire other people in Australia and overseas to find creative ways to save their libraries.
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