Al Jazeera's Mohammed Adow, reporting from the capital, Khartoum, said Arman's withdrawal is significant because he was seen as the favourite to compete with Omar al-Bashir, Sudan's president.
"Yasir Arman is a Muslim from the north but he joined the Sudan's Liberation Movement when it was fighting the government in the north," he said.
"For many years, he was a high-ranking official in the SPLM until 2005 when the peace agreement accord was struck putting the war between the north and south at hold.
"His withdrawal is significant because he is seen as the most credible opponent to President Al-Bashir."
Total boycott considered
Our correspondent said Arman would likely have garnered votes from the north as well as southern Sudan.
"This paves a very dark picture of what the outcome will be for the relationship between the two parties [SPLM and NCP] that have formed the national unity government in Sudan.
"This could have an effect on the upcoming referendum next year that will decide whether the north and south will stay united."
Earlier on Wednesday, a coalition of opposition parties met to discuss plans to boycott the elections, after their calls for postponing the April 11 poll were dismissed.
Going ahead with Sudan's elections as planned would be a "disaster", the groups cautioned, saying it would be impossible to hold a fair and free poll by the scheduled date.
They also said many candidates have not been given the fair opportunities to carry out significant electoral campaigns in the volatile country.
The opposition wants the polls delayed until November, citing a continued conflict in Darfur and unresolved complaints of electoral irregularities.
Opposition presidential candidates are due to meet on Thursday to make a final decision on the proposed boycott.
Khalil Ibrahim, the leader of the Justice and Equality Movement (Jem), the biggest opposition group in Darfur, joined the call on Wednesday for a delay in the election.
"These elections are based mainly on false senses, especially in Darfur. Masses of populations ... will be excluded from the elections," he told Al Jazeera.
"Especially the nomads - they can not participate in these elections. So we are calling for the delaying of this and we want to accelerate the peace process first."
Jem has been negotiating a peace deal with the Sudanese government, but Ibrahim said it would be a catastrophe if al-Bashir wins the election.
"He will continue the violence, especially in the west part of Sudan," he said.
"I don't think the other parties will accept this, there will be chaos and war if he [al-Bashir] wins."
Al-Bashir has rejected calls to delay the vote, saying he will refuse to hold a referendum on the autonomy of the country's south if the SPLM boycotts the elections.
Al-Bashir's NCP has ruled Sudan in a coalition with the SPLM since a peace deal that ended war between the two sides of Sudan in 2005.
Al-Bashir has ruled Sudan for more than 20 years without holding elections.
"Holding elections in the Sudan is a national obligation that should be fulfilled," he said on Monday.
"They [the SPLM] are calling for cancelling the elections and holding the referendum. This is unacceptable nonsense."
The presidential and legislative elections on April 11 will be the country's first multiparty polls in 24 years.
The north-south civil war that began in 1983 claimed an estimated two million lives and destabilised much of East Africa.