The 30 high-ranking executives will instead receive stock that cannot be sold for at least five years, the New York-based bank said Thursday.
But the restrictions won't affect the more than 31,000 other employees at the bank, potentially including some of its top traders who could be rewarded handsomely for helping Goldman turn big profits this year.
Banking bonuses have been a hot-button political issue. Financial markets have recovered much faster than the broader economy, and the nation's unemployment rate sits at 10 percent. Surging financial markets allowed companies like Goldman Sachs to rebound and start posting big quarterly profits, while setting aside billions of dollars to pay out year-end bonuses.
Goldman has also been criticized for using $10 billion in government bailout money to help ramp up its aggressive trading practices. Goldman received the money late last year as part of the $700 billion bank rescue program. Goldman paid back the money this summer, allowing it to escape restrictions on compensation.
Trying to stem the negative publicity over the issue, Goldman has said in recent months it was reviewing its pay policies.
"The measures that we are announcing today reflect the compensation principles that we articulated at our shareholders' meeting in May," Goldman CEO Lloyd Blankfein said in a statement.
Goldman had set aside $16.71 billion, or about 47 percent of net revenue, through the first nine months of the year for compensation. That includes not only bonuses, but also salaries and associated costs such as benefits and payroll taxes.
The majority of compensation for Goldman's senior management, which includes top managers across all its business units, has traditionally been paid out in year-end bonuses.
Aside from not being able to sell the stock for five years, the 30 executives' stock awards could be taken back by the bank in cases where the employees took too large a risk or failed to raise concerns about risk in the company, Goldman said.
Politicians have chastised Wall Street bankers for taking excessive risk, which resulted in big bonuses but also helped lead to the credit crisis and recession.
Shares of Goldman rose 41 cents to $166.85 in afternoon trading.