Parents of several of the young people who were killed in the attack mounted by far-right extremist Anders Breivik have complained that they were not consulted, while locals living near the site have described the proposed monument as "a rape of the landscape".
On Monday, Norway's local government minister Jan Tore Sanner announced the delay alongside culture minister Thorhild Widvey, arguing that the extra time would allow the local Hole municipality to assess the monument in a "dignified manner".
Widvey stressed however that the decision to postpone the project did not mean the government was open to new proposals for the location and choice of memorial.
"The selection of artworks and location of the monument on Sørbråten remains unchanged," he said. "Parliament has allocated funds for a memorial on Sørbråten in Hole."
Memory Wound, the striking monument proposed for the site by Swedish artist Jonas Dahlberg, won acclaim across the world when it was unveiled in March, but quickly generated opposition from locals.
The artist plans to create a "permanent scar" on the landscape by carving a three-and-a-half-meter wide slice out of the Sørbråten peninsular, which juts out into the Tyrifjorden towards Utøya.
However, locals objected to the damage to their local environment and the high visibility of the monument, with some also arguing they did not want to be reminded daily of the terrible events of three years ago.
Jørn Øverby, who is leading locals opposing the project, said he was disappointed that the government was refusing to scrap Dahlberg's scheme.
"We will never accept this option and will continue to fight against it. If we are not heard, we will consider a lawsuit," he said.