On Friday, crowds opposed to the expansion attacked police in the city of Ningbo in Zhejiang province.
Officials from Ningbo's city government announced on Sunday evening that work on the project would now not go ahead.
Environmental protests have become more common in China. They come ahead of a once-in-a-decade change of national leaders in Beijing.
Protesters gathered again in Ningbo on Sunday, marching on the offices of the district government. They are opposed to the expansion of the plant by a subsidiary of the China Petroleum and Chemical Corporation.
"There is very little public confidence in the government," protester Liu Li told the Associated Press.
"Who knows if they are saying this just to make us leave and then keep on doing the project," she added.
On Saturday, police dispersed more than 1,000 protesters in Ningbo.
Witnesses described scuffles and said a few people were arrested.
Local police accused protesters of throwing stones and bricks at officers. Residents, however, said the violence came after police used tear gas and made arrests.
Local officials met demonstrators later on Saturday to hear their demands.
The huge growth in China's economy has come at a huge environmental cost.
Many Chinese are becoming more environmentally aware and are deeply concerned about pollution, correspondents say.
Plans to expand a petrochemical plant in eastern China have been shelved after days of protests.