"Today, I am suspending my campaign for the presidency," Huntsman said at a Monday press conference in Myrtle Beach.
The former ambassador to China also endorsed frontrunner Mitt Romney because he said he thinks Romney is the best candidate to beat President Barack Obama in November.
Romney was not present for the endorsement.
Huntsman made an appeal to the remaining contenders to stop attacking one another in television ads.
"This race has degenerated into an onslaught of negative and personal attacks not worthy of the American people," he said during his announcement.
Despite his third-place finish in New Hampshire, Huntsman had been at the bottom of the polls in South Carolina.
His decision to drop out comes as pressure has been increasing on Texas Gov. Rick Perry to leave the race to allow South Carolina's influential social conservatives to unify behind either former Pennsylvania Sen. Rick Santorum or former House Speaker Newt Gingrich.
The South Carolina primary is on Jan. 21.
Candidate Rick Santorum called the endorsement of Romney a moderate backing a moderate.
"I'm not surprised at that at all and anticipated that sooner than today," Santorum said.
To stand out in a crowded field, Huntsman positioned himself as a tax-cutting, budget-balancing chief executive and former business executive who could rise above partisan politics.
The Associated Press contributed to this story.