Ban said at an unscheduled news conference at parliament, after meeting leaders of conservative parties, that it was "meaningless" to join them.
"I have decided to give up the pure intention of trying to lead political change and accomplish national reconciliation," he said.
Ban returned to South Korea on Jan. 12 after serving 10 years as UN chief but had been unable to capitalise on his much-anticipated homecoming, cutting a sometimes-irritable figure in public and mired in a series of perceived PR gaffes and a scandal involving family members.
Even without announcing his intention to run, his support ratings in opinion polls had slipped to second place behind the presidential candidate for the main opposition Democratic Party, after peaking at nearly 30 percent last year.
Conservative President Park Geun-hye has been impeached by parliament amid a wide-ranging corruption scandal, complicating any run by Ban. He had been expected to run as a conservative but was unable to secure any party affiliation.
If the impeachment vote against Park is upheld by the Constitutional Court, she will have to quit and an election would be held two months later. A ruling is expected as soon as late this month.