It follows an emergency meeting with the five Health Trust bosses on Friday afternoon.
Mr Poots has ordered the trusts to drop their current proposals and begin a new process which places "the principle of sensitivity to the needs and wishes of older people" at its core.
Speaking after the meeting, the DUP minister said: "It is unacceptable that any older person feels distressed because of proposals for change.
"Older people and their families have been left upset and alarmed. That should never be the by-product of a process which is all about improving the lives of older people and giving them more control. This is why we will have a fresh start.
This is about listening to our older people and their families and our own staff.
"I expect a process which not only identifies the needs of each individual affected by proposed changes, but also understands the wishes of every single individual and their families. I expect these wishes to be respected, and this extends to all staff."
Sue Ramsey, who chairs the Health Committee at Stormont, said "common sense" prevailed.
The Sinn Féin MLA continued: "Common sense has prevailed and clearly the situation has been handled wrongly. The minister has shown that he is in charge, something he should have done from the beginning of this fiasco.
"The policy of Transforming Your Care is about making our health system better and bringing that care into the community, not spreading fear and uncertainty about the future."
Mr Poots summoned the trust chiefs after it emerged that the Western Trust had earmarked all of its homes for closure, with similar proposals in place in the northern and southern areas.
He defended the Transforming Your Care scheme - which was to close around half of homes - but said he won't stand by the closure of all homes in the next five months.
Local politicians and unions have called for the minister to resign.
UUP leader Mike Nesbitt said: "The issue is simple. Either the minister did not realise this was a sensitive issue, in which case he is not fit for office.
"Or, if he was aware of the sensitivities, he failed to prevent deep and unnecessary hurt, trauma and distress to many elderly people and their families. Either way, surely it is a resignation matter for a man of principle."
Kevin McCabe of NIPSA said: "The dogmatic mantra of private sector good, public sector bad must end or it will have serious ramifications for the present and future health of NI people.
It is clear to NIPSA the Health Service in Northern Ireland is in crisis.
"NIPSA therefore calls for a halt to the implementation of Transforming Your Care and furthermore for the resignation of the Health Minister."
UNISON has also described Mr Poots' position as untenable.
Questions had been asked about why the Trusts were going above and beyond the 50% closure plans of the TYC reforms, which were focused on helping elderly people live at home.
Claire Keatinge, the Commissioner for Older People, said: "I think the question is simple.
"Transforming Your Care proposed a reduction in the number of places in statutory and other residential care, there is a reduce in demand for residential care as more people are cared for in the community and that is proper and that is right.
"There is currently an abject failure of leadership across the Health and Social Care Trusts, across the social care board and from the Minister to join up how he is going to consult on the process by which consideration is given to which if any care homes should close."
Serious concerns were raised by the Patient and Client Council. It said: "Decisions must be taken with residents and their families - not for them."
Professor Michael O'Flaherty from the NI Human Rights Commission also voiced "deep" concerns over "potentially inhuman and degrading treatment" of those living in homes.
Meanwhile residents at several of the affected homes vowed to fight to keep them open.
Roy Beggs of the UUP said: "What must happen now is for the Minister and his senior officials from the Health and Social care Board to be upfront and tell us what TYC will really mean in practice. The bottom line is the Minister has failed, confidence is shattered, and we are all in a much worse place than we were before the DUP took over the Department of Health."
Conall McDevitt of the SDLP said: "The minister needs to start asking fundamental questions about how the trusts were able to take steps in implementing proposals, which were in direct conflict with the departmental policy contained in the Transforming Your Care document."