Mr Menem's campaign was in trouble despite his strong start
Former President Carlos Menem has said he is quitting Argentina's presidential
race, leaving provincial governor Nestor Kirchner to win by default.
There will be no run-off vote on Sunday and Mr Kirchner will now be declared president, but before that occurs, Argentine law requires Mr Menem to formally withdraw in writing.
However, Mr Kirchner will not be happy at being denied the chance to win a clear mandate in a run-off round, says the BBC's Tom Gibb in Buenos Aires.
With courage and decisiveness, I will assume the responsibilities of governing this country
To restore international credit and regain the support of the IMF, he is going to need to make tough decisions which may well go against powerful vested interests within his own Peronist party, our correspondent says.
Speaking earlier in the middle of a pushing and shoving crowd of supporters and journalists in his home province of La Rioja, Mr Menem said conditions were not right for competing in the presidential run-off on Sunday.
Mr Menem accused the outgoing President, Eduardo Duhalde, who has supported his rival, of mounting a campaign of lies to undermine his candidacy.
Mr Menem said Mr Kirchner could keep the 22% of the vote he won in the first round and he would keep the people.
Many of his supporters in the crowd were in tears.
Earlier, Mr Kirchner strongly criticised his opponent after repeated reports that Mr Menem was giving up his candidacy, saying a withdrawal by his opponent would amount to desertion and robbing the people of their right to vote.
Mr Menem, 72, gained the largest number of votes in the first round of balloting at the end of April, but opinion polls put him well behind Mr Kirchner.
The polls give Mr Kirchner about 60% support, compared with less than 30% for Mr Menem, who led Argentina from 1989 to 1999.
Even the seasoned political fighter had conceded that he was at least 10 points behind.
Several Argentine newspapers reported on Tuesday that Mr Menem was going to withdraw from the race before the second round on 18 May.
He cancelled several scheduled appearances on Tuesday, fuelling speculation that he had decided to withdraw.
Kirchner: Needed legitimacy an election would have brought
On Tuesday night, Mr Menem addressed his supporters from the balcony of the hotel where his headquarters are based and said: "I won't cheat you, expect more news."
The election was brought forward to give the country a leader with a clear popular mandate, after angry crowds tossed the last elected government from power over its handling of the worst economic crisis in the country's history, the BBC's Peter Greste in Buenos Aires says.
Mr Kirchner badly needs the legitimacy that an election would bring if he is to make the deeply painful reforms that economists say Argentina must suffer, he adds.
Many Argentines blame Mr Menem's decade in power in the 1990s for the country's deep economic crisis, says Tom Gibb.