In a letter to President Barack Obama, Rice said the politicization of her potential nomination had become an "irresponsible distraction."
"I am fully confident that I could serve our country ably and effectively in that role," Rice wrote in the letter. "However, if nominated, I am now convinced that the confirmation process would be lengthy, disruptive and costly -- to you and to our most pressing national and international priorities."
"That trade-off is simply not worth it to our country," she added.Read Susan Rice's letter to President Obama
The ambassador has been criticized by Republicans for her response to the terrorist attack on the U.S. consulate in Benghazi that killed U.S. Ambassador Chris Stevens and three other Americans.
Mr. Obama has accepted Rice's decision to remove her name from consideration.
"While I deeply regret the unfair and misleading attacks on Susan Rice in recent weeks, her decision demonstrates the strength of her character, and an admirable commitment to rise above the politics of the moment to put our national interests first," the president said in a written statement. "The American people can be proud to have a public servant of her caliber and character representing our country."
ABC News contributed to this report.