President Donald Trump approved military strikes against Iran in retaliation for the shooting down of US surveillance drone, the New York Times reported.
But on a day of escalating tensions, the president backed down from launching them on Thursday night (US time).
The Times reported that as late as 7pm military and diplomatic officials were expecting a strike.
Senior administration officials said the about-face came on a day of intense discussions and debate at the White House among the president's top national security officials and congressional leaders.
Officials said the president had initially approved attacks on a handful of Iranian targets, like radar and missile batteries.
The operation was reportedly in its early stages when it was called off, a senior administration official said. Planes were in the air and ships were in position, but no missiles had been fired when word came to stand down, the official said.
The White House on Thursday night declined requests for comment.
Asked earlier in the day about a US response to the attack, Trump said, "You'll soon find out."
The swift reversal was a stark reminder of the serious risk of military conflict between US and Iranian forces as the Trump administration combines a "maximum pressure" campaign of economic sanctions with a buildup of American forces in the region. As tensions mounted in recent weeks, there have been growing fears that either side could make a dire miscalculation that led to war.
According to the official who spoke to The Associated Press, the strikes were recommended by the Pentagon and were among the options presented to senior administration officials.
It was unclear how far the preparations had gone, but no shots were fired or missiles launched, the official said.
Pentagon video released earlier in the day showed a smoke trail from the US$130 million drone following a missile strike which Trump called a "big mistake".
Amid the increasing fears of open conflict, Senate Majority Leader Mitch McConnell confirmed to Fox News "measured responses" would be coming.
Those in the White House Situation Room meeting included CIA Director Gina Haspel, Secretary of State Mike Pompeo and Army Secretary Mark Esper.
Defense Secretary Patrick Shanahan was pictured holding a folder marked "SECRET/NOFORN", the Daily Mail reported.
In a statement, House Republican Leader Kevin McCarthy and Ranking Members Rep. Michael McCaul, Rep. Devin Nunes and Rep. Mac Thornberry said: "There must be a measured response to these actions. President Trump and his national security team remain clear-eyed on the situation and what must be done in response to increased Iranian aggression.
"In Congress, we stand ready to support our men and women in uniform, our country, and our allies in the region."
The strike would have been the president's third military action against targets in the Middle East.
Trump had struck twice at targets in Syria, in 2017 and 2018.
It was not clear whether Trump changed his mind on the strikes or whether the administration altered course because of logistics or strategy.
It was also not clear whether the attacks might still go forward.
On Thursday evening (US time) the FAA issued an emergency order prohibiting all US flights in Tehran-controlled airspace above the Persian Gulf and Gulf of Oman.
Earlier Thursday the US gave GPS coordinates that suggested the drone was shot down 33km off the Iranian coast in the Strait of Hormuz.
But the Islamic Revolutionary Guard Corps said it brought the drone down because it was "violating Iranian air space" over the waters of Hormozgan province.
Iran's Foreign Minister Mohammad Javad Zarif provided coordinates to back the claim.
"At 00:14 US drone took off from UAE in stealth mode & violated Iranian airspace," Zarif tweeted. "It was targeted at 04:05 at the coordinates (25°59'43'N 57°02'25'E) near Kouh-e Mobarak.
"We've retrieved sections of the US military drone in OUR territorial waters where it was shot down."