The Tory leadership hopeful announced a policy on Monday to "tailor pay to the cost of living where civil servants actually work" in a bid to save billions from the annual budget.
Critics pointed out the policy would leave nurses and teachers in the Midlands and the North on lower salaries than London and the South East, calling the idea "politically suicidal".
On Monday night, Truss laid out plans to cut £11bn from the civil service with regional pay boards, slashing annual holiday allowances for civil service staff, and dropping diversity advisers.
Many Tories publicly spoke out against the plans, claiming they would renege on the party's pledges to level up the North and the Midlands.
"It's the absolute antithesis of one nation Conservatism," Tory MP Simon Hoare and Rishi Sunak ally told PoliticsHome on Tuesday.
"Politically suicidal, and economically illiterate."
The Conservative mayor for Tees Valley in the North East said the plans had left him "speechless".
"There is simply no way you can do this without a massive pay cut for 5.5m people including nurses, police officers and our armed forces outside London," said Ben Houchen, also an ally of the former chancellor.
"So much that we’ve worked for in places like Teesside, would be undone."
And Sunak ally Tory MP Matt Warman said the move would feel like "austerity on steroids".
"In my constituency we pay extra to attract NHS staff, despite having some of the lowest average wages in the UK," said the former culture minister.
"Regional pay would mean longer waiting lists for surgery, longer waits at A&E. It would mean a longer wait for an ambulance - that’s lives at risk."
Deputy Labour leader Angela Rayner described Truss as a "liability".
"Her fantasy plan would hammer the north and slash the pay of nurses, teachers, and police officers facing the biggest cost of living crisis in a generation," said Rayner.
“If Liz Truss is handed the keys to Number 10, workers outside the M25 will see their pay levelled down as she kicks out the ladder."
Responding to the backlash, a spokesperson for Truss said there had been a “wilful misrepresentation” of her policy plans.
"Current levels of public sector pay will absolutely be maintained," they said. “Anything to suggest otherwise is simply wrong."
Senior Tory MP and Sunak ally Mark Harper criticised Truss' team for claims the policy had been misrepresented.
"Stop blaming journalists - reporting what a press release says isn’t “wilful misrepresentation”," said the former chief whip.
"So this U-turn has wiped out £8.8bn in savings. Where are these going to come from now?
"An economic policy that can’t be paid for isn’t very Conservative. Mrs Thatcher would be livid."
On Tuesday afternoon after the u-turn, Truss told the BBC people were “unnecessarily worried” about the plans.
"I’m being absolutely honest, I’m concerned that people were worried – unnecessarily worried – about my policies and therefore I’m being clear that the regional pay boards will not go ahead," said the foreign secretary.
It comes after new polling suggests the former chancellor is catching up with Truss in the race to Number 10.
In July, YouGov polling put Truss: 62% and Sunak at 38% - but a later poll put Truss at 48% and Sunak at 43%.
The foreign secretary still remains the favourite to be the next Tory leader with the victor announced on 5 September after Tory members vote on the pair over the summer.
Watch: Liz Truss says public sector pay cut policy was ‘misinterpreted’