A theatre threatened with closure would be best left in the hands of the community, councillors said.
Conservative-run Thurrock Council was proposing to sell the Thameside Complex in Grays, which also houses a library and museum, as part of plans to cut £34m from its budget by 2024.
However they reconsidered the plan after a campaign to save the complex.
An update on further negotiations would be made in March, reported the Local Democracy Reporting Service.
At a cabinet meeting, the council said that, following negotiations with community groups who wanted to take over running the theatre, they felt it was the best option.
Mark Coxshall, councillor responsible for regeneration, strategic planning and external relations, said: "The last six months have been extremely constructive and I hope a community-run building will be the outcome of this.
"There's still a lot of work to be done because I want to make sure that we're not back here in five years' time in the same state and that is with a low-funded, poorly-maintained building and not enough residents engaging and using the building."
Thurrock Council's annual budget for 2021-22 was £152.1m.