The report was withdrawn after huge protests by opposition parties.
The report was presented to the Supreme Court on Wednesday in connection with a case against a proposed shipping canal project between India and Sri Lanka.
Hindu hardliners say the project will destroy what they say is a bridge built by Ram and his army of monkeys.
Scientists and archaeologists say the Ram Setu (Lord Ram's bridge) - or Adam's Bridge as it is sometimes called - is a natural formation of sand and stones.
In their report submitted to the court, the government and the Archaeological Survey of India questioned the belief, saying it was solely based on the Hindu mythological epic Ramayana.
They said there was no scientific evidence to prove that the events described in Ramayana ever took place or that the characters depicted in the epic were real.
Hindu activists say the bridge was built by Lord Ram's monkey army to travel to Sri Lanka and has religious significance.
In the last two days, the opposition Bharatiya Janata Party (BJP) has launched a scathing attack on the government for questioning the "faith of the million".
Worried about the adverse reaction from the majority Hindu population of the country, the Congress Party-led government has now done a U-turn and withdrawn the statement submitted in court.
The government asked the court for three months to try and sort out the issue.
Additional Solicitor General Gopal Subramaniam, appearing on behalf of the government, said they would set up a mechanism to hear concerns expressed by those opposed to the canal project.
The court adjourned the matter for three months saying they would take up the case again in January.
In the meantime, the court has said that dredging work for the canal could continue, but Ram's Bridge should not be touched
On Wednesday, Hindu hard-line organisations blocked roads across India to protest against the Sethusamudram Shipping Canal Project.
Commuters in the capital, Delhi, were stuck in traffic jams for hours as Vishwa Hindu Parishad (World Hindu Council) and Bajrang Dal blocked roads at various places.
Road blocks were also held in Bhopal, the capital of the central state of Madhya Pradesh, on the Delhi-Agra highway and on the Jaipur-Agra highway.
Train services were disrupted in many places across northern India.
The canal project proposes to link the Palk Strait with the Gulf of Mannar between India and Sri Lanka by dredging a canal through the shallow sea.
This is expected to provide a continuous navigable sea route around the Indian peninsula.
Once complete, the canal will reduce the travel time for ships by hundreds of miles and is expected to boost the economic and industrial development of the region.
— Rama, heir to the ancient Hindu throne of Ayodhya, is sent into exile with his wife, Sita, and brother Lakshmana
— Ravana, the demon king, kidnaps Sita in the woods while the brothers are hunting, and takes her to the island of Lanka Rama, unable to cross the ocean, sends Hanuman the monkey king to find Sita but she refuses to leave unless Rama comes for her
— Hanuman rallies his monkeys to cast stones into the sea and form a bridge to Lanka
— Tiny palm squirrels help by carrying pebbles to the waters edge and Rama, touched by their efforts, stroked one, marking it with the stripes — hence giving the five-striped palm squirrels their name
— Rama crossed the bridge with the monkey army in tow to do battle with Ravana’s demon army. Ravana is killed
— Sita and Rama are reunited but Rama refuses to take her back as his wife. To prove her purity, she walks through a funeral pyre and emerges intact. The pair return to Ayodhya to take the throne