The candidates, who are not affiliated with any party, join a boycott by reformist parties of the elections on Friday.
Nearly all of the 5600 remaining candidates vying for spots on the 290-seat parliament are conservatives certain to win amid expected low-voter turnout.
"So far, 550 candidates have withdrawn from the elections," the Islamic republic's ministry said on its website on Saturday, without giving a reason for the withdrawals.
The election furore began when the clerics of the Guardian Council last month banned more than 3600 candidates. Nearly all of them are supporters of efforts to expand Western-style democracy and loosen strict interpretations of Islamic codes in areas such as social activities and the media.
The mass disqualification of reformists has triggered Iran's biggest political crisis in years.
About 130 members of parliament resigned in protest. The country's main reformist party decided to boycott the elections, saying the results were a foregone conclusion.
Ayat Allah Ali Khamenei has
called for a high turnout
The Guardian Council, appointed by Iran's supreme leader Ayat Allah Ali Khamenei, reinstated about 1200 candidates in stages after sit-ins and protests by liberal politicians and backers. The rest remained blackballed - all leading reformists, including 80 sitting lawmakers.
That left only minor liberal contenders on the ballot, and many of them have since dropped out. One candidate who withdrew, Abu al-Fazl Rauf, said he had not been vetted "according to defined legal procedure".
"I see this against my dignity as an Iranian citizen," said Rauf, an independent.
The biggest challenge will likely be persuading apathetic and disillusioned citizens to vote in an election seen as flawed and undemocratic.
A government survey predicted that only about 30% of 46 million eligible voters would take part in the polls.
In 2000, parliament elections drew more than 67% of voters when reformers took control of the chamber for the first time since the 1979 Islamic Revolution.
On Friday, the Ayat Allah urged a high turnout in the elections to give "a slap in the face" to pro-reform groups and others calling for a boycott.
A sharp drop in voter turnout would be widely interpreted as a powerful sign of support for reformers.