Georgia's ruling party announced on Thursday it was halting plans to introduce a so-called "foreign agent" bill after mass rallies against the legislation seen as reminiscent of Russian legislation used to silence critics.

The announcement came after two days of large-scale protests, including a rally on Wednesday that saw Georgian police fire water cannon and tear gas at thousands of demonstrators and issue a dispersal order.

Ruling party Georgian Dream said in a statement the bill had been "represented in a bad light and in a misleading way", adding that it would launch public consultations to "better explain" the law's purpose after announcing its withdrawal.

A European Union delegation in Georgia immediately cheered the halt, saying they "encourage all political leaders in Georgia to resume pro-EU reforms".

Massive crowds had gathered in front of the parliament building in central Tbilisi on Wednesday, holding EU and Georgian flags, and chanting "no to the Russian law".

The protesters demanded authorities drop the bill on "transparency of foreign funding", which critics said mirrors a law used in Russia to force media and dissenting groups to shut down.

Elene Ksovreli, 16, said Georgians did not want to see their future threatened.

"We will not allow them to make Russia define our future," she said. "We, young people, are here to protect our everything."

Another demonstrator, 72-year-old Aza Akhvlediani, called the country's government "stupid".

"I know what's happening in Moscow. They stop every passerby and do whatever they please to them. I think the Georgian government wants the same," she said. (AFP)