News Corp deputy chair Chase Carey says it is 'too difficult to progress in this climate'Credit: David Jones/PA
In a statement today the company confirmed it no longer intends to make an offer for the remaining 61 per cent of the broadcaster it does not own.
The bid had been due to face the Competition Commission and was also the subject of a Labour motion calling for its withdrawal, due to be voted on later today.
Yesterday the government confirmed it intended to give its backing to the motion, which would have called for withdrawal of the bid in light of allegations against News International title the News of the World.
"We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate," Chase Carey, deputy chairman of News Corporation said.
"News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it."
Speaking in the House of Commons today during prime minister's questions, David Cameron said the company should focus on sorting out the mess surrounding the allegations made against it, which have included further accusations of phone hacking and payments to police.
"It is increasingly clear everyone wanted to separate what is happening to News International and what is happening to BSkyB.
"They should stop worrying about mergers and sort out the mess they have created".
Last month culture secretary Jeremy Hunt, who was overseeing the decision on the bid, had announced that he intended to give the merger the green light.
However, following further allegations against News International title News of the World, Hunt went back to the regulators for advice.
At this point News Corporation withdrew its proposed undertakings which had previously appeased concerns for media plurality.
This resulted in Hunt announcing the bid would be – as originally recommended by Ofcom – referred to the Competition Commission.
But in the past 24 hours the government threw its weight behind a Labour motion calling on News Corporation boss Rupert Murdoch to withdraw the bid "in the public interest".
Following News Corp's announcement a Downing Street spokesman said the news was "welcomed".
"As the prime minister has said the business should focus on clearing up the mess and getting its own house in order".
Labour leader Ed Miliband also released a statement calling the news "a victory".
"People thought it was beyond belief that Mr Murdoch could continue with his takeover after these revelations.
"It is these people who won this victory. They told Mr Murdoch: 'This far and no further'.
"Nobody should exercise power in this country without responsibility."