"In this time of war, I simply cannot let my campaign, be a part of aiding a surrender to terror," he added, referring to Obama and Clinton's pledges to withdraw US troops from Iraq.
"I nearly started crying - he's the only hope that we had as conservatives"
Toni Woods, Mitt Romney supporter
Romney also commended McCain, saying that while the two disagreed on some issues "I agree with him on doing whatever it takes to be successful in Iraq, on finding and executing Osama Bin Laden and on eliminating al-Qaeda and terror."
Many of his campaigners were despondent at his decision.
"'I'm shocked, I nearly started crying," Toni Woods, a student Romney campaigner who witnessed the speech at the Conservative Political Action Conference, told Al Jazeera.
"He's the only hope that we had as conservatives."
Romney, a multi-millionaire businessman who if successfully elected would have been the first member of the Mormon faith to be president, had performed disappointingly in this week's Super Tuesday nomination contests.
On Tuesday, Romney had secured a comfortable win in Massachusetts and a handful of rural Western states, including the Mormon heartland state of Utah.
However, he lost the more coveted contests in New York and California - which hold the most delegates crucial to winning the nomination - to McCain.
He also lost the big southern states to Mike Huckabee, the former Arkansas governor who had scored surprise wins after appealing to evangelical Christian voters.
'Disappointment at decision'
Credited with turning around the scandal-hit 2002 Winter Olympics in Utah, Romney maintained the more traditional Republican positions throughout his campaign.
He opposed same sex marriage, took a strong stand against immigration and said he strongly supported the US-led war in Iraq, arguing any withdrawal would mean "walking away".