The bondholders' law firm, Brown Rudnick, in early February sent Penney a letter saying that the department store operator had breached a covenant by granting a lien on its inventory.
The letter said Brown Rudnick represented investors who hold more than half of the outstanding bonds due in 2037.
The indenture agreement related to $326 million of outstanding bonds that mature in 2037, although the letter said that J.C. Penney could be in default on all of its $2.9 billion bond debt, according to a lawsuit filed by Penney soon after.
In a lawsuit, Penney asked a Delaware judge to declare that it was not in a default of its bond agreements.
The withdrawal of the notice of default is a break for Penney at a time concerns are high the chain could face a cash crunch after it reported a 31.7 percent decline in same-store sales during the fourth quarter.
Brown Rudnick was not immediately available for comment.
Shares of J.C. Penney ended regular trading on Wednesday down 0.7 percent at $16.17. The stock has fallen more than 50 percent in the past year.
(Reporting by Phil Wahba in New York; Editing by Steve Orlofsky)