Gay priest Canon Jeffrey John has said he will not take up the post of Bishop of Reading.
Canon Jeffrey John says he is now celibate
It follows weeks of bitter argument within the Anglican Church about whether or not he should be allowed to hold the position, because of his sexuality.
Dr John said he made the decision because of the "damage" his consecration might cause to the "unity of the Church".
The Archbishop of Canterbury, Dr Rowan Williams, praised his "dignity and forbearance" and made clear that homosexuals "are full and welcome members of the Church", despite "unsavoury" comments during the row.
But Dr Williams said it would not have been acceptable to see the Church split, particularly from congregations in the developing world, and that it was time for members to reflect on what had happened.
Dr John will now seek the permission of the Crown to withdraw his acceptance of the job, according to a spokesman for the Bishop of Oxford, Richard Harries, who made the appointment.
Bishop Harries said he accepted Dr John's decision "with great sadness" but was aware of the "immense pressures" he had been under.
In reply to Dr John's letter of resignation, he wrote: "I would like you to know that not only did you have my unswerving support, but also that of a great many others in the diocese."
Dr Williams, who was recently forced to deny claims that homosexual clergy were being promoted to change Church policy on the issue by stealth, said the question of homosexuality in the Church had not gone away.
"Canon John's withdrawal should not be taken to mean that the church can now stop being concerned about how it discerns the will of God in this area of ethics," he said.
The Archbishop said he had been contacted by many members of the church and a number of the letters "displayed a shocking level of ignorance and hatred towards homosexual people".
Dr John, who was due to be consecrated on 9 October, has been in a relationship with a man for 27 years, but says he is now celibate.
Dr Carey upheld a traditionalist line on homosexuality
The decision to make him the Bishop of Reading prompted a crisis within the church, with nine senior bishops writing to national newspapers to express their anger.
The Archbishop of Nigeria, the leader of the world's biggest Anglican community, threatened to break ties with the Church if the appointment went ahead.
The Archbishop of Canterbury was accused of turning his back on clergy in the developing world after he said he raised no objection to Dr John's appointment.
Answering his critics recently, Dr John said: "My own view is that there is a sound argument from scripture and tradition in favour of Christians accepting same-sex relationships, provided they are based on a personal covenant of lifelong faithfulness."
He had the support of at least eight bishops, who wrote to Dr Williams to say they backed the appointment, but the row had been expected to dominate this week's meeting of the General Synod, the Church's parliament.
Conservative members of the Church welcomed Dr John's decision.
Joel Edwards of The Evangelical Alliance said: "Our initial thoughts are relief that the decision has gone this way. It is definitely in the interests of the church."
But gay rights campaigner Peter Tatchell warned: "Having scored this victory, anti-gay evangelists are looking to step up
their campaign against gay people in the church."
Dr John's announcement came after the former Archbishop of Canterbury, Dr George Carey, said he ordained two bishops he "suspected" were gay in the 1990s.
His acknowledgement marked his first intervention in the row within the Anglican Church over the appointment of Canon Jeffrey John.
However, Dr Carey said he had "never knowingly ordained a practising homosexual".
He said he was against the appointment of Dr John and would stop an ordination if he learned the person was in a homosexual relationship.