Qalibaf, a former Guards commander and police chief, was one of main rivals of president Hassan Rouhani who is seeking a second term.
Hard-line candidate Ebrahim Raisi also accused Rouhani of blocking a corruption probe against his relatives.
"I ask all my supporters in the country to support the success of our great brother Hojatoleslam Seyed Ebrahim Raisi", Qalibaf stated in a letter published in social media.
Qalibaf's decision brings the number of candidates competing in Friday's election to five, though more may drop out in the coming days to solidify support for other candidates.
Most Iranians have yet to see the benefits of the nuclear deal.
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Mr Raisi, is now the head of the powerful Imam Reza shrine and charitable foundation in the holy city of Mashhad and, in addition to attracting support from traditional conservatives, is seen as the favoured candidate of the security establishment.
Iran's relations with the USA, which improved under Rouhani and led to the nuclear deal and the lifting of some sanctions, have also hung over the campaigning.
He launched brutal tirades against Mr Rouhani and his reformist allies in televised debates between the presidential candidates, accusing them of corruption and failing to support the poor. He called a vote for Raisi a "crucial decision" to "preserve the unity" of the revolution.
The two candidates were the top conservative challengers to President Hassan Rouhani, a pragmatist whose government negotiated a 2015 deal with world powers to rein in Iran's nuclear program in exchange for lifting global sanctions. Qalibaf's dropping out may serve to get him more votes in his challenge to Rouhani.
This was stated by a senior researcher with the Center for Middle East Studies of the Institute of Oriental Studies at the Russian Academy of Sciences Vladimir Sazhin at a recent roundtable dubbed "Iran's power landscape ahead of the presidential election", TASS reported. Rouhani added that tourism in 2013, before the deal lifted some sanctions, was less than that recorded in April this year.
"Qalibaf's votes will be divided between Rouhani and Raisi".
This election is important as it will decide who will lead - an "Osoulgarayan" (principalist) or a reformist - the future political trajectory of Iran both domestically and internationally. "In Tehran, his votes will go mainly to Rouhani but outside Tehran his supporters will vote for Raisi".