Subscribers will be able to use both services under one account and one password, CEO Reed Hastings said Monday in a blog post.
Investors saw the reversal as an Oscar-worthy move, sending the stock up $8.63, or 7.4 percent, to $125.84 in morning trading after rising as high as $128.50.
Less than a month ago, the Netflix said it would split the DVD rental business off on a new website, to be called Qwikster.
Subscribers howled at the move, saying they saw Netflix as a destination for movies in general and didn't want to manage two accounts.
"It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs," Hastings said in the blog post.
In July, the company said that customers who want streaming movies and DVDs will have to pay for them separately. The "Qwikster" announcement was a follow-up to that change. Analysts saw it as a way for Netflix to distance itself from the older DVD business, which has less future potential than Internet streaming.
Even with Monday's premarket bounce, Netflix's shares have been savaged by the price change and the "Qwikster" initiative. They've lost more than half their value since July.