The company said that it was "too difficult to progress" the proposed takeover "in this climate". News Corporation has received political and public criticism over its standards after phone hacking allegations hit a UK newspaper under its ownership.
"News Corporation announces that it no longer intends to make an offer for the entire issued and to be issued share capital of British Sky Broadcasting Group PLC not already owned by it," News Corporation said in a statement sent to OUT-LAW.
"We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate," Chase Carey, Deputy Chairman, President and Chief Operating Officer of News Corporation, said in the statement.
"News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it," Carey said.
News Corporation already owns 39.1% of BSkyB. It first announced it wanted to buy the remaining shares in the UK's biggest broadcasting company last year.
Phone hacking allegations at the News of the World (NotW) newspaper have received wide condemnation from politicians and public figures. The NotW is owned by News International, the UK arm of News Corporation. Bosses at News International announced the paper was closing last week amidst the outcry over alleged phone hacking practices at the paper.
A private investigator working for the NotW is alleged to have hacked into voicemail messages left on phones. It has been alleged that the phones of murdered schoolgirl Milly Dowler and the families of people killed during the terrorist bombings in London have been hacked.
Members of Parliament representing all three major political parties had been expected to back a motion in the House of Commons on Wednesday calling on News Corporation to withdraw its bid for BSkyB.
Prime Minister David Cameron last week announced a public inquiry would take place into the alleged phone hacking. Cameron also announced a separate inquiry into the culture, practices and ethics of the press.
On Monday the UK Culture Secretary announced that he was referring News Corporation's proposed bid to the Competition Commission. It would have had up to 32 weeks to consider whether a takeover would have left competition in the UK in a healthy state and whether it would have benefited the affected organisations, customers and the economy.
