"I have accepted Neera Tanden’s request to withdraw her name from nomination for Director of the Office of Management and Budget," Biden said in a statement released Tuesday.
Tanden had requested her withdrawal with a letter in which she told Biden that she didn't see a path to confirmation.
"Unfortunately, it now seems clear that there is no path forward to gain confirmation, and I do not want continued consideration of my nomination to be a distraction from your other priorities," she said.
Tanden's nomination was ripe for controversy at the outset. A former Obama administration official and adviser to Bill and Hillary Clinton's campaigns, she has long been active in Democratic politics. She currently leads one of the nation's most prominent liberal think tanks, the Center for American Progress.
Shortly after Biden announced her nomination, she reportedly deleted more than 1,000 of her previous tweets, including ones that were critical of Republicans.
During her confirmation hearing last month, Tanden came under fire for hostile remarks she made about politicians. Sen. Rob Portman, R-Ohio, pointed out a number of statements, including Tanden calling Sen. Susan Collins, R-Maine, "the worst."
"I wonder, specifically, how do you plan to mend fences and build relationships with members of Congress you have attacked through your public statements?" he asked.
Tanden responded with an apology, and pledged to work very aggressively to meet Portman's concern. That apparently didn't convince Sen. Joe Manchin, D-W.Va., a key swing vote who said last month that he would oppose Tanden's nomination.
Without Manchin, Tanden would have faced an increasingly difficult road to a majority vote in the Senate where Democrats and their independent allies hold just 50 seats. Collins, another perceived moderate and swing vote, also said she would oppose Tanden's nomination.
Even this week, however, the White House expressed confidence in Tanden's nomination.
"We remain committed to fighting our hearts out for Neera Tanden," White House Press Secretary Jen Psaki told "Fox News Sunday."
Biden meanwhile indicated in his Tuesday statement that he would place Tanden in another role in his administration -- likely one that doesn't require Senate confirmation.
"I have the utmost respect for her record of accomplishment, her experience and her counsel, and I look forward to having her serve in a role in my Administration. She will bring valuable perspective and insight to our work," he said.