More than 200 cameras targeted at Muslim suburbs of Birmingham as part of a secret counter-terrorism initiative are to be dismantled, it emerged today.

The West Midlands police chief constable, Chris Sims, said he believed all cameras installed as part of the £3m surveillance initiative should be taken down to rebuild trust with local Muslims.

The scheme, Project Champion, was shelved less than six months ago when an investigation by the Guardian revealed police had misled residents into believing the cameras were to be used to combat vehicle crime and antisocial behaviour.

In fact, the CCTV and automatic number plate reading (ANPR) cameras were installed as part of a programme run by the force's counter-terrorism unit with the consent of the Home Office and MI5.

Police failed to obtain statutory clearance for around a third of the cameras, which were covert. After the Guardian's investigation, bags were placed over the cameras, which had been installed in Sparkbrook and Washwood Heath.

In a statement, Sims said: "I believe that the support and the confidence of local communities in West Midlands police is the most important thing for us in the fight against crime and terrorism.

"We can fight crime and the threat posed by terrorism far more effectively by working hand in hand with local people, rather than alienating them through a technological solution which does not have broad community support."

Sims made no reference to the legal action he would have faced if he let the scheme continue. The civil rights organisation Liberty wrote to the force last week, threatening to commence judicial review proceedings at the high court unless the force agreed within 14 days to "dismantle the full surveillance infrastructure".

Today's recommendation was backed by the police authority and will not be put to a project board set up in August to take over management of the cameras. The board, which was recently told almost all members of its advisory group wanted the cameras dismantled, is unlikely to object when it meets on Thursday.

Last month an official inquiry found the initiative had been implemented with virtually no consultation, oversight or regard for the law. The review by Sara Thornton, the chief constable of Thames Valley police, found the scheme was devised in 2007 to place a surveillance "net" around two neighbourhoods identified as containing a high proportion of terror suspects.

A bid was made for a national counter-terrorism grant in January 2008. Thornton found that senior officers devised a "storyline" that concealed the cameras' purpose. Counter-terrorism insignia was removed from paperwork as part of a strategy to "market" the surveillance operation as a local policing scheme.

Senior police failed to ask questions about the operation's "proportionality, legitimacy, authority, necessity, and the ethical values inherent in the proposed course of action", Thornton found.

Officers also failed to comply with national CCTV regulations or conduct proper consultation, Thornton said.

Today, a Birmingham council scrutiny committee released its own report, finding senior police officers guilty of "deliberately misleading" councillors over the purpose of the scheme.

There have been no resignations or disciplinary action, although the police authority has launched an investigation into claims that councillors were misled by Stuart Hyde, who is now deputy chief constable of Cumbria police. No action is known to have been taken against the assistant chief constable Anil Patani, who had overall responsibility for the project.