But in an address to the nation, Mr Chirac promised to modify two of the law’s most controversial clauses.
He pledged to shorten from two years to one the period in which youths could be fired – and said employers would have to give a reason for the dismissal.
The law, known as the CPE, makes it easier for employers to hire and fire people under the age of 26.
It is not clear if Mr Chirac’s decision will stop the protests, says the BBC’s Caroline Wyatt in Paris.