By Charles Duxbury And Sven Grundberg 

STOCKHOLM--Sweden's prime minister on Saturday canceled snap elections planned for March after reaching a series of deals with the country's main opposition parties to make it easier for minority governments to function.

Stefan Löfven said his Social Democrats and junior coalition partner the Green Party had reached agreements with four center-right opposition parties to reduce the likelihood of a minority government's budget being voted down, as was the case earlier this month.

Speaking at a news conference in Stockholm, Mr. Löfven identified three areas--pensions, defense and energy--where the government and the opposition would seek common ground on policy. Finding common ground would make it easier for the minority government to push its economic policy through parliament and get at least passive support from the opposition, potentially avoiding a recurrence of the political turbulence Sweden has suffered this fall.

Sweden's political instability began after a regular election in September handed Mr. Löfven's center-left party a relatively narrow victory and no majority in parliament.

The problems mounted when a combination of the four-party center-right bloc and unaligned populist party the Sweden Democrats in early December voted down Mr. Löfven's first budget. That prompted the prime minister to call snap elections for March in the hope of winning a stronger mandate for his policy from voters.

However, concerns were raised early that a new election could merely prolong the uncertainty as the Sweden Democrats had said they would continue to vote against budgets--center right or center left--that didn't drastically cut spending on immigration, a cornerstone of the populist party's manifesto.

In the event, Mr. Löfven stepped back from officially calling fresh elections, something he had said he would formally do on Dec. 29.

Mr. Löfven said the government's agreement with the opposition extended Sweden's "proud tradition" of being able to work together to solve difficult problems.

The leaders of the four center-right parties said they would continue to represent a strong opposition to the government despite the agreement to seek common ground in certain policy areas.

Because of the way the voting went on the 2015 budget, Mr. Löfven will have to stick many of the opposition's budget plans--such as tax policy--until he can table a new budget next fall.

Write to Charles Duxbury at charles.duxbury@wsj.com and Sven Grundberg at sven.grundberg@wsj.com