The stone is thought to have been in Soulbury, Buckinghamshire for 11,000 years. The road was built round it.
Residents said they would chain themselves to it when the council said the stone may have to be moved.
The council has now said it would be "lunacy" to move it, but was looking for ways to make the road safer.
Local legend claims the rock, known as the Soulbury Boot, appeared on Chapel Hill after villagers fought with the devil and cut off his foot.
Some people also claim it rolls down the hill as the church chimes midnight.
More rolling news from Buckinghamshire as it happens
It is not known how the boulder gets back up the hill, but it was in its usual place when a motorist allegedly hit it, damaging her car and later claiming compensation, according to the Leighton Buzzard Observer.
A Buckinghamshire County Council spokesman told the BBC it had been discussing the future of the stone with the parish council "following the alleged incident".
Removing the stone was "an option" but the council was aware it would not be a popular choice.
A Facebook community group launched a Save our Soulbury Stone (Soss) campaign calling for residents to reject any proposal to move it, with some vowing to chain themselves to the rock to protect it.
However, Conservative councillor Mark Shaw has now told the BBC that "to move it, or even discuss moving it... would be absolute madness".
He described it as the "heart and soul" of Soulbury.
"What we want to do is clearly make the road safe and secure for all drivers but actually it would be absolute lunacy to move that stone," Mr Shaw said. "Let's bear in mind this is about one person who's crashed into this stone in over 11,000 years."

Police said the man was being held over alleged offensive behaviour. He is understood to be among those pictured in a recent police CCTV images appeal.
Several appeals for information were made after toilets were vandalised at the game and offensive effigies of Rangers fans were hung from the stands.
The match, which Celtic won 5-1, took place at Celtic Park on 10 September.

After 11 hours of secret discussions, the musicians could not reach a decision on a replacement for Sir Simon Rattle, who steps down in 2018.
Board member Peter Riegelbauer said they would try again "within a year".
The orchestra's 123 members met in a south-west Berlin church on Monday and were banned from using mobile phones.
But after an announcement was delayed several times, Mr Riegelbauer said: "I must unfortunately tell you that we haven't reached any result."
From September 2017, Sir Simon is to join the London Symphony Orchestra as its music director.
Among his possible successors are:
The Berlin Philharmonic, founded in 1882, has had three chief conductors over the past six decades:

Burnley Empire Theatre defaulted to the care of the Duchy of Lancaster as an "owner of last resort" after the ownership could not be established.
Last used as a bingo hall in 1995, the Cow Lane venue was recently named the fifth most at risk theatre in the UK.
Campaigners who want to restore the building to its former glory said the decision was a blow to their plans.
Sophie Gibson from the Burnley Empire Theatre Trust (BETT), said: "This news came as something of a surprise and a disappointment.
"The viability study, which the council contributed to as well, is currently taking place and the results are due very shortly.
"If, as we hope, the verdict is a positive one we can then move on to stage two, the architectural planning phase for the project, when we also begin applying for funding.
"All of this could have been for nothing if it is auctioned off before we are able to get that far."
The Duchy of Lancaster, said it had been left with "no alternative" but to put it to bidders after offering it free of charge to both Burnley Council and the Theatre Trust - an offer that "remains open".
A spokesman added: "The Duchy remains hopeful that the building will remain in local ownership."
BETT said it could not yet afford the legal costs that would be incurred to take on the building.
The four-storey building, designed by  G. B. Rawcliffe, opened in 1894 as a music hall, before being converted to a cinema in 1938.
It is to be auctioned in Manchester on 16 October.
A large boulder which has sat in the middle of a road for decades is to stay where it is despite a car crashing into it, a council has said.
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A 23-year-old man has been arrested in connection with disorder at the recent Celtic v Rangers game in Glasgow.
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Members of the Berlin Philharmonic orchestra have been unable to agree on who should be their next chief conductor and artistic director.
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A dilapidated Grade-II listed theatre, which has stood empty for over 20 years, is to be sold at auction.