Another eight Liberal Democrat MPs also declared their support for Mr Kennedy as nominations closed. He now has the backing of a majority of the party's 46 MPs in the election to choose a successor to Paddy Ashdown.
The Kennedy camp claimed their man now had unstoppable momentum. "It should be a shoo-in," one supporter said.
But opponents claimed Mr Foster's endorsement would backfire on Mr Kennedy, since Mr Foster had been the only candidate calling for the party to forge closer links with the Government.
Mr Foster's withdrawal, announced just 15 minutes before last night's deadline for nominations, leaves five candidates in the contest, which will run until August 9. Mr Kennedy's rivals, who are all less keen than him on close relations with Labour, are Jackie Ballard, the party's spokeswoman on women's issues; Simon Hughes, the health spokesman; David Rendel, who speaks on social security; and Malcolm Bruce, the Treasury spokesman, who defied predictions that he too would pull out.
Mr Foster decided to withdraw yesterday after an exchange of letters in which Mr Kennedy promised he would not rule out extending co-operation with Labour, while stressing that he would fully consult his party first. Mr Foster, the party's education spokesman, claimed he had been in second place but admitted Mr Kennedy had a better chance than him of winning. "It is not an ego trip; elections are about more than personal ambition," he said.
Mr Kennedy would combine "strong principle with level-headed pragmatism" and would continue Mr Ashdown's style of co-operation with Labour, he said.
The Liberal Democrats' so-called "Gang of Four" senior figures - Menzies Campbell, Nick Harvey, Paul Tyler and Archy Kirkwood - rallied behind Mr Kennedy, saying he had "the best all-round blend of abilities as a communicator, campaigner, thinker and leader". They were joined by four other MPs, Mark Oaten, Lembit Opik, David Chidgey and John Burnett.
Mr Kennedy's rivals insisted the race was far from over and claimed Mr Foster had withdrawn to avoid a derisory vote which would limit the scope for co-operation with Labour.
Ms Ballard said that party members had not liked Mr Foster's calls for closer links with Labour. "Now Charles Kennedy is giving that message as well; I think we will see the number of members voting for him will slump dramatically."
Mr Hughes said the contest was now a two-horse race between him and Mr Kennedy. "The choice before the party is now clear. The establishment, much of the media and those warmer to Labour are gathering on one side; the grassroots, the mass membership of the party and the majority who are much more sceptical about Labour are gathering on the other."
Mr Campbell warned that the five-horse race would still leave a "multiple choice question" for the party's 90,000 members.