"I would never forgive myself if my candidature distracted voters from the key issues and particularly David's rousing call for change."
He described his 26 years representing the people of Bracknell as "both a privilege and huge fun".
But he added: "I understand why people are angry. I hope my decision to step down goes some way to showing my constituents how sorry I am about my own situation."
Last week the Conservative Party said a review of Mr MacKay's expense claims revealed "an unacceptable situation that would not stand up to reasonable public scrutiny".
Jan Angell, a Conservative councillor in Bracknell, told BBC News Mr MacKay had "done the honourable thing".
"I've known Andrew for 26 years, he's been an excellent councillor and I find it a very sad day. He's a very hands on MP, very hardworking and I do find it really sad."
Mr Mackay saying he would stand for reselection - 22 May 2009
Mr MacKay insisted his decision was not the result of a public meeting on Friday, during which he was heckled by angry constituents.
In the meeting, open to all constituents, one man accused him of failing to accept responsibility for his actions and another said he would no longer vote Conservative.
But one woman said he had shown courage to face his constituents.
Afterwards, Mr MacKay told reporters he would still stand for reselection, saying he had the backing of most of those at the meeting.
But one onlooker, who attended the meeting, accused him of misrepresenting the mood of the meeting and said he was, in fact, "overwhelmingly opposed".
Meanwhile, pressure is mounting on Mr MacKay's wife, Ms Kirkbride.
The News of the World claims she allowed her 59-year-old brother, Ian Kirkbride, to stay rent free in her apartment in a stately home in Bromsgrove.
It also alleges Mr Kirkbride had registered a business to the address at the same time as his sister had been claiming more than £1,000 a month in mortgage payments on the flat.
In a statement, Ms Kirkbride said her brother spent time at both of their homes, looking after her son.
"There is no cost to the taxpayer in the arrangement and there is nothing for me to apologise for. To describe this arrangement as my brother living rent-free is a total distortion," she added.
A petition has already been set up in Ms Kirkbride's constituency calling for her resignation.
Organisers of the Julie Must Go campaign say they hope to collect 10,000 signatures by the beginning of June.
A petition calling for Ms Kirkbride's resignation has been launched
The revelations over MPs' expense claims reported in the Daily Telegraph have led to considerable political fall-out.
The Conservatives have the highest number of casualties, including Douglas Hogg, MP for Sleaford and North Hykeham, Sir Peter Viggers, MP for Gosport, Totnes MP Anthony Steen and now Mr MacKay, who will all stand down at the next election.
Labour has seen Commons speaker Michael Martin resign and Shahid Malik step down as justice minister. Two others, former agriculture minister Elliot Morley and backbencher David Chaytor, have been suspended by the Parliamentary Labour Party.
Earlier on Saturday, senior Labour MP Ian McCartney, for Makerfield, announced he would be standing down at the next election due to poor health.
On Friday, Vale of Glamorgan MP John Smith, also said he was also standing down due to his health and a wish to spend more time with his family.
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