Hungarian government spokesman Zoltan Kovacs confirmed the withdrawal to The Associated Press on Wednesday. The joint decision by Prime Minister Viktor Orban, Budapest Mayor Istvan Tarlos and the Hungarian Olympic Committee will be formally voted on by the Budapest City Assembly.
Fidesz, the governing party, said the decision was made to avoid "a loss of international prestige" for Hungary, saying the bid had a very small chance of success.
The bid was expected to face a city-wide referendum promoted by a new political party, which gathered more than 266,000 signatures in favor of holding the vote.
The International Olympic Committee will choose the host city in September.