He has told friends he wants to stay in "national politics", triggering speculation that he retains hopes of securing a post in the Blair government, despite being on the hard left of the parliamentary Labour party.
The ex-GLC leader's decision exposes sharp infighting that is proving to be Labour at its bitchiest. The great prize of becoming the first popularly elected Mayor of London has prompted an orgy of gouging and biting long before voters decide whether they want to choose their own Dick Whittington.
Supporters of Glenda Jackson, the minister responsible for transport in London, accuse Peter Mandelson, the Minister Without Portfolio, of plotting to halt the bandwagon already rolling for the Oscar-winning former actress.
His spin doctors, they say, are rubbishing Ms Jackson's claims to the job, suggesting it would be a snub to the capital's ethnic minorities. Their favoured candidate is the impeccably Blairist Trevor Phillips, a black media star and former student activist.
Coincidentally, he is also a friend of Mr Mandelson from his early days at LWT, where Mr Phillips went on to become a senior executive. Indeed, the minister was his best man at his recent wedding. A Westminster insider said: "Peter is going to push Trevor to the bitter end. But in the end, he will damage Glenda, himself and the party."
With the withdrawal of Mr Livingstone from the race, the field is now wide open. Nobody has yet formally declared - Londoners do not vote on the principle of an elected mayor plus a new local authority until a referendum on 7 May - but they are all jockeying for position.
Ms Jackson, MP for Hampstead and Highgate, does not have the all-important personal imprimatur of the Prime Minister on her candidature, and it is already clear that Downing Street is determined to say who will rule the capital, while sheltering behind the public view that "we are not in the endorsement business". So critical is this power of patronage that Ms Jackson's campaigners are protesting that she does not take it for granted that his hand will come to rest on her shoulder.
One of her campaigners complained: "Someone has been trying to make mischief. They have been pretending that Glenda's running round saying she is Tony's choice, when Glenda knows anyone who wants to be mayor will have to stand on their own two feet, and cannot expect to be swept into office on the Prime Minister's coat-tails."
Mr Blair's people have made it plain that they do not want Mr Livingstone behind a big desk as Mr London, and they would go to considerable lengths to stop him standing. He will fight for his right to stand, but he will not put his name forward.
To muddy the waters yet more, the Mandelson camp is also pressing the claims of Health Secretary Frank Dobson. But Mr Dobson doesn't want the job either. Besides, all he has in common with Dick Whittington is that they both came from York.
The Tories also have their eyes on the prize. Lord Jeffrey Archer, the pulp fiction writer, is running his own campaign, while Stephen Norris, the former Transport Secretary and Westminster lothario, has also ruled himself back in the race.Reuse content