"I wanted to help President Park Geun-Hye. But I believe that my resignation is the way to help her at this point," Moon Chang-Keuk told a press conference.
"So today, I'm giving up my nomination for the prime minister," he said.
A political novice, the 65-year-old former journalist had been a surprise choice from the start, and his nomination swiftly became a political battleground because of past comments about issues related to Japan's 1910-45 colonial rule over the Korean peninsula.
The prime minister's job fell open after incumbent Chung Hong-Won resigned amid strident public criticism of the government's response to the Sewol tragedy which claimed around 300 lives, mostly schoolchildren.
Moon wasn't even Park's first choice. That was Ahn Dai-Hee, a former Supreme Court justice who was forced to withdraw his nomination last month following controversy over income he amassed after leaving the bench and going into private practice.
But it is the only cabinet post requiring parliamentary approval, and Moon would have had to endure a rough confirmation hearing.
The controversy concerned remarks he made regarding two linked issues -- Japan's 1910-45 colonial rule over the Korean peninsula, and the Japanese military's use of wartime sex slaves.
In a 2011 church lecture, Moon had described the repressive colonial period as "God's will" and in an editorial six years earlier said the terms of a 1965 treaty with Tokyo ruled out further compensation for South Korean women forced into Japanese military brothels.
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