ISLAMABAD (Reuters) - Pakistan opposition leader Imran Khan backed down from his threat to shut down the capital on Wednesday, vowing instead to hold a celebratory rally about a Supreme Court decision to pursue a case linked to Prime Minister Nawaz Sharif.

"On the Supreme Court's advice, we have decided that tomorrow we will thank God and celebrate a Day of Thanks at (Islamabad's) parade ground," Khan told media on Tuesday, speaking outside his home in Islamabad.

The celebratory rally is a step back from his threat to paralyze the city and the government, and is likely to ease tension that has boiled over into violence in the days ahead of the planned protest in the capital.

(Reporting by Asad Hashim; Writing by Drazen Jorgic; Editing by Kay Johnson and Clarence Fernandez)