Mr Abe said he was accepting a court-mediated settlement reached after a long stand-off between the central government and local authorities.
The government wants to move the US Futenma airbase from its densely populated site to a more remote area.
But local officials and residents want the base removed entirely.
Japan has already began land reclamation work off the shore of Camp Schwab, the US base in Henoko, south of Nago city.
Mr Abe said he would now be ordering that work to stop, but that the government's plan was still to eventually relocate the base to Henoko.
The US has about 26,000 US troops and several bases in Okinawa as part of a long-standing security alliance forged with Japan after World War Two.
Resentment at the US presence has been growing among Okinawans, particularly since the 1995 gang-rape of a 12-year-old girl by US troops.
Residents have also complained about the environmental impact of land reclamation.
Japan's PM Shinzo Abe has agreed to suspend construction work required for the relocation of a controversial US military base in Okinawa.