"We need to pull the story into the future: to change, but also preserve," Norway's Prime Minister Erna Solberg told an Oslo press conference.
The compromise decision, which ends three years of agonized debate, will see the demolition of the 'Y-Block', which boasts a facade by the Spanish artist Pablo Picasso and is rated one of Norway's most valuable pieces of modernist architecture.
However it saves the high rise, a 1958 masterpiece by the brutalist architect Erling Viksjø, which formerly housed the offices of the Prime Minister.
A government-appointed committee concluded last year that the best solution in economic terms would be to knock down the entire government quarter. But Solberg said the government had decided against this.
"We've wanted to bring our common history into the new quarter," said Ms. Solberg. "We want to keep the façade of the H block, the square in front of the block and its integrated art."
Kjell Magne Bondevik, a former Norwegian Prime Minister, said keeping the high-rise building would symbolize Norway's refusal to change following Breivik's politically-motivated attacks.
"It's important that the high-rise is preserved. Both because it is an important symbol of political life in Norway, but also an important response to Anders Behring Breivik," he told Aftenposten.
Several architects expressed their sadness at the decision to knock down the Y-block, however, with Hege Maria Eriksson, the head of the Norwegian Centre for Design and Architecture, described the decision as "sad"
"The Y-block and the high-rise form an interaction, and are part of the same architectural and artistic work," she said. "The decision to demolish is going a little too fast."
Jan Tore Sanner, the country's minister for local government and modernization, said that the government had been convinced to demolish the Y-block because of the possibilities created.
"We want the new Government Quarter to become green and open," he said. "That would have been difficult if we had kept the Y-block."
Demolishing the Y block, the R4 building and the S block is expected to cost some 15.5 billion Norwegian krone ($2.6 billion).
Sanner said that the Y-block's Picasso-designed facade would be preserved, although he did not explain how that would be done.
"The art, the seagull and the fish, will of course be taken care of. These are the most important artworks, and we're concerned that they are safeguarded," he said.
The explosion, on July 22nd, marked the start of Breivik's bomb and gun massacre.
Eight people were killed in the blast and many more injured. Breivik then went on to kill 69 people, mostly teenagers, at a Labour Party summer camp on the island of Utøya outside Oslo.