SYDNEY (Reuters) - The Australian state of New South Wales has reversed a ban on greyhound racing that was due to come into force on July 1 next year.

The sport will now be allowed to continue but with fewer tracks, a cap on the number of dogs bred for racing and much tougher measures to ensure the welfare of the animals.

State Premier Mike Baird, who has been under pressure from his own party on the issue, said the reprieve was a last chance for the industry to reform.

"I previously didn't think the industry could change, it's clear the community wanted to give that opportunity," he told reporters in Sydney.

In July this year, Baird said the findings of a commission of inquiry had left the government with "no acceptable course of action except to close the industry down".

The inquiry found evidence of systemic animal cruelty, including live baiting, and that up to 68,000 greyhounds bred in the last 12 years had been destroyed because they were considered uncompetitive.

(Reporting by Nick Mulvenney, editing by Greg Stutchbury)