The device was launched for the US market earlier this week and will be available to users from next month.
But the 1GB data cap had drawn criticism, not least among potential buyers.
In a statement, T-Mobile said, "We removed the 1GB soft limit from our policy statement, and we are confident that T-Mobile G1 customers will enjoy the high speed of data access over our 3G network.
"The specific terms for our new data plans are still being reviewed and once they are final we will be certain to share this broadly with current customers and potential new customers."
But, T-Mobile added, "At the same time, we have a responsibility to provide the best network experience for all of our customers, so we reserve the right to temporarily reduce data throughput for a small fraction of our customers who have excessive or disproportionate usage that interferes with our network performance or our ability to provide quality service to all of our customers."
T-Mobile, therefore, might reduce the access speeds of some customers it deems to be downloading too much.
In advance of the first Google Android device coming onto the market, Google has just launched the first Android software development kit.
SDK version 1 will encourage developers to build new apps around the Android operating system.