The cartoon Green Dam Girl has been used to mock the filtering plan.
Protests have forced China to clarify whether net-filtering software has to be used on every new PC.
From July, every PC sold in China was supposed to be supplied with the Green Dam Youth Escort software.
The software was created to stop people looking at "offensive" content such as pornographic or violent websites.
But widespread disapproval inside China, legal challenges and overseas criticism have forced the Chinese government to clarify its policy.
"The use of this software is not compulsory," an official with China's Ministry of Industry and Information Technology (MIIT) told the AP news wire.
The state agency that created Green Dam has said it was possible to uninstall the program. But it was unclear whether those that did so would face prosecution.
In its ruling this week, China said anyone removing or refusing to use it would not face official sanctions.
Green Dam busters
The change comes thanks to growing criticism from Chinese people about Green Dam. A legal challenge has been filed to MIIT demanding a public debate on the legitimacy of making computer firms put the software on PCs.
Petitions calling for Green Dam to be scrapped have circulated widely and analysis shows that it does a piecemeal job of stopping pornographic sites and inadvertently blocks sites dealing with sexual health issues.
A website set up to challenge Green Dam has gathered tens of thousands of comments from those who say the filtering system is crude and blocks many legitimate sites.
The China Daily newspaper, which typically backs the government, has written stories critical of the filtering policy and reported that many PC makers were refusing to install it.
Some critics have drawn a manga-style cartoon of Green Dam Girl to mock the software's aims.
China has the largest net-using population in the world and many have turned to the web to publicise issues such as corruption that would otherwise go unreported.
Tests carried out on Green Dam outside China also showed that it left PCs open to many different security risks.
Analysis by Scott Wolchok, Randy Yao, and J. Alex Halderman at the University of Michigan found weaknesses in the URL, text and image filtering system and vulnerabilities in the software that makes machines susceptible to being hijacked.
"Green Dam makes frequent use of unsafe and outdated programming practices that likely introduce numerous other vulnerabilities," they wrote in a paper placed online.
