Opposition heads into run-off elections with the odds stacked against their candidate.
Citing violence against his supporters as a major reason for the withdrawal, Tsvangirai also called on the United Nations and the African Union (AU) to intervene to stop “genocide” in Zimbabwe.
The opposition announcement came after thousands of police in full riot gear and soldiers blockaded the site of the MDC’s main campaign rally.
Al Jazeera’s Haru Mutasa, reporting from Harare, said people were very tense amid the uncertainty over which way the country would go.
She said stones had been thrown at cars and people, but there had been no large scale violence after Tsvangirai’s announcement so far.
UN urges end to violence
The UN in a statement said the circumstances that led to the MDC’s withdrawal was “a deeply distressing development” for the country’s future.
A spokesperson for Ban Ki-moon, the UN secretary-general, called for “the campaign of violence and intimidation” to be stopped, saying it had “done a great disservice to the people”.
Ban also backed a call by the Southern African Development Community (SADC) for the poll to be postponed as “conditions do not exist for a run-off election to be held at this time”.
The US also demanded that Zimbabwe’s government halt election violence immediately.
“The government of Zimbabwe and its thugs must stop the violence now,” Carlton Carroll, a White House spokesman, said in a statement on Sunday.
Tsvangirai, who beat Mugabe in a March 29 vote but failed to win the absolute majority needed to avoid a second round, has repeatedly accused security forces and pro-government militia members of intimidation and strong-arm tactics to ensure Mugabe’s victory.
He reiterated this claim on Sunday, saying there was a state-sponsored plot to keep Mugabe in power.
“We will no longer participate in the violent illegitimate sham of an election process,” Tsvangirai said.
“We believe an election that reflects the will of the people is impossible.”
Tsvangirai, who was detained by police five times while campaigning, said that 86 MDC supporters have been killed and 200,000 displaced from their homes.
Tendai Biti, his lieutenant, is in custody on a treason charge and other offences that carry a possible death penalty.
Denying Mugabe legitimacy
Following the news conference, Tsvangirai told Al Jazeera that his supporters “will support this decision because our council is representative of all the provinces at the grassroots level”.
“They are the ones we have to confront with this on a daily basis, they have to live with this violence, and therefore, when we took this decision, it was really an informed decision, and I think it’s the best decision for our people.”
Asked if pulling out of the race meant handing victory to Mugabe, he said: “We are not giving victory to anyone.
“In fact, if we are to proceed to an election, it would satisfy Robert Mugabe because then he would be able to claim legitimacy, but if we withdraw because the conditions are so compelling then he will have a hollow victory to claim. I think everyone agrees that these elections are not acceptable.”
However, his arguments were rejected by Bright Matonga, the Zanu-PF deputy minister of information.
Speaking to Al Jazeera, Matonga said: “If he decides to pull out, it would be very unfortunate for our young democracy. You would deprive immediately those Zimbabweans who have always wanted to choose their leader or the right to do so.
“We tell him to think twice, so that this process is complete.
“If he loses, there is another democratic process where he can challenge the result in court, if he thinks he has been deprived of the right to campaign freely, we don’t condone or tolerate any form of violence.”
Sikhanyiso Ndlovu, Zimbabwe’s information minister, said: “The constitution does not say that if somebody drops out or decides to chicken out the run-off will not be held.
“It is an election of the people of Zimbabwe against Britain and America.”
Mugabe’s government has been portraying Tsvangirai as a puppet of Western powers out to recolonise Zimbabwe. The opposition, Britain and the US reject such claims.
South African mediation
The developments come as a South African mediation team is visiting the country to try to help resolve Zimbabwe’s political crisis.
Tsvangirai said he is still open to continued talks and that South African efforts needed to be “expanded”.
Thabo Mbeki, South Africa’s president, is mandated by the regional SADC bloc to mediate between Zimbabwe’s opposition and the ruling Zanu-PF to try to end the political and economic crisis.
“We are very encouraged that Mr Tsvangirai, himself, says he is not closing the door completely on negotiations,” Mukoni Ratshitanga, spokesman for Mbeki, said on Sunday.
Mbeki had reportedly sought to have the run-off cancelled in favour of talks on forming a national unity government.
Tsvangirai, however, says that Mbeki has made no proposal to him about a national unity government and the Zimbabwean government plans to go ahead with the run-off election.