In a speech read on his behalf, the jailed leader said on Friday that he would instead be throwing his support behind former prime minister Mahmud Abbas.
Al-Barghuthi had earlier come under pressure from Fatah to drop potentially divisive plans to run for Palestinian president from his Israeli jail cell.
Palestinian cabinet minister Qaddura Faris, a member of Fatah, visited al-Barghuthi in prison on Friday to try to dissuade him from challenging its presidential nominee, Abbas.
Faris told a news conference that al-Barghuthi appreciated Abbas' gestures, including a promise to hold long-overdue elections in Fatah next year, and would support his candidacy.
"After a meeting of four hours, during which we debated this issue, Marwan Barghuthi sends this message to the Palestinian people and its fighters. He calls on the members of the movement to support the movement's candidate, Mahmud Abbas," Faris said.
Al-Barghuthi was the main voice in a revolt which called for an independent Palestinian state after peace negotiations collapsed in 2000. He has long been seen as a potential successor to Palestinian president Yasir Arafat, who died earlier this month.
Palestinian political analysts predicted he would have stood a strong chance of winning the ballot, drawing support from mainstream voters as well as from those who oppose Abbas' call to end the uprising.
Passionate and articulate, al-Barghuthi advocated peace with Israel, making his case for an end to occupation in the West Bank and Gaza in fluent Hebrew.