A favourite of the liberal left, the Massachusetts senator had been a frontrunner in the Democratic field.
However, Ms Warren, 70, failed to convert early excitement into votes.
The Democratic contest to take on President Donald Trump is now seen as a two-horse race between former Vice-President Joe Biden, 77, and Vermont Senator Bernie Sanders, 78.
Ms Warren’s endorsement will now be highly sought after by both candidates.
Her departure will clear the path for Mr Sanders in particular, now the sole progressive candidate left in the race.
With Ms Warren’s departure, a Democratic race that began with a record high of female candidates is now effectively left to two male front-runners.
The erudite Ms Warren vaulted into the political arena more than a decade ago as she pushed for tougher regulation of the financial sector after the 2008 economic collapse.
She championed the creation of the Consumer Financial Protection Bureau – a government agency that would serve as a Wall Street watchdog.
In 2010, she helped the Obama White House set it up.
Two years later, the former Harvard law professor rode that momentum to a seat in the US Senate for Massachusetts.
Though her name was floated as a possible 2016 Democratic nominee, the senator demurred, saying she was not interested in the top job.
This time around, Ms Warren was the first major Democratic candidate to announce her plans for a presidential bid.
Early in the race, her policy-centric approach – “I’ve got a plan for that” was a favourite refrain – seemed effective. In October last year, she led most national polls.
But by December 2019, Ms Warren had been pushed back, hurt by a difficult debate where her rivals hammered her over key policy promises like Medicare for All.
And despite massive investments in early voting states, Iowa, New Hampshire and Nevada, Ms Warren failed to be a top-two finisher in any – in fact she came third in her home state of Massachusetts on Super Tuesday.
Her exit follows closely behind former South Bend, Indiana mayor Pete Buttigieg and billionaire Michael Bloomberg.