The official, who asked not to be named because he was not authorised to speak to the media, told The Associated Press that President Hamid Karzai's brother, Qayyum Karzai, was dropping out of the race and will back Zalmai Rassoul.
The decision came after days of speculation and backroom meetings, including some held at the presidential palace.
Although Hamid Karzai has not come out in support of any one candidate, he publicly declared he did not support his brother's candidacy. He said he had urged his brother not to run.
The elder Karzai's decision to step out of the race leaves 10 hopefuls in the upcoming presidential elections.
Karzai's campaign official, who participated in some of the meetings, said it was decided that Rassoul and Karzai shared similar visions for their country and their competing candidacy would split the vote, likely denying either one of them a win at the polls.
The soft-spoken Rassoul served as Karzai's foreign minister until announcing his intention to seek the presidency. Known as a loyalist to former King Zahir Shah, Rassoul has come out in favor of Afghanistan signing a Bilateral Security Agreement with the United States, which would allow for a residual US and NATO force of up to 15,000 soldiers to remain behind after the final withdrawal of international combat troops at the end of December.
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