Argyll and Bute Council has changed its plans to introduce a parking charge at harbours on Mull.
The plans would have seen parking charges of up to £9 a day being imposed at Craignure, Fionnphort and Tobermory.
Locals said the council had failed to properly consult on the issue before pushing ahead with a traffic regulation order (TRO), which would have allowed the charge to be brought in.
Communities had started legal proceedings.
Their lawyers were preparing to raise a civil action at the Court of Session in Edinburgh.
The council then backed down on its initial proposal after the islanders on Mull and Iona challenged the parking charge.
Although a consultation exercise was carried out, the council admits it was not as robust as it should have been, as the exercise did not cover Iona or Mull.
Argyll and Bute Council chief executive Cleland Sneddon said: "We have to apologise unreservedly to the people of Mull and Iona, however, for a flawed exercise - with our biggest regret being the negative impact this has had on relationships between residents of Mull and Iona, and the council.
"We can assure residents that we have learned lessons from this, and that we remain committed to working with our communities to deliver parking arrangements that work for the residents and visitors of Mull and Iona."
He added: "We are putting a report about the TRO to next week's Oban, Lorn and Isles Area Committee. This states publicly our wish to apologise for the impact of this TRO."