Chicago Mayor Rahm Emanuel agreed to reduce the new tax to 50 cents a pack.
Last week, several aldermen said the higher tax would send more buyers to the black market to buy loose cigarettes.
They worry cigarette sales would drop in the city.
To make up for the loss in revenue, the city is proposing to raise the fire hydrant violation from $100 to $150.
Public health experts urged the mayor to keep the tax increase at 75 cents.