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 But the move was unlikely to derail the process entirely, after
the Elections Commision, known as the KPU, ruled out another ballot
to determine the outcome.
Prabowo's rival, Joko "Jokowi" Widodo, is widely expected to be
named the next leader of Indonesia, home to the world's biggest
Muslim community.
"I can confirm that Prabowo-Hatta are withdrawing from the election.
That leaves only one candidate in the election," Aryo
Djojohadikusumo, a lawmaker with Prabowo's Gerindra party and his
nephew, told Reuters. He was referring to Prabowo's
vice-presidential running mate, Hatta Rajasa.
When asked by reporters to confirm his withdrawal, Prabowo declined
to comment.
A KPU spokesman said the withdrawal of Prabowo's team would not
affect the legitimacy of the election process.
"We are almost done ... and close to announcing. This doesn't mean
that we have to redo the election," said KPU spokesman Hadar Gumay.
The Prabowo camp alleges mass cheating in voting on July 9, enough,
they say, to overturn Jokowi's predicted victory.
 By unofficial counts suggest that would need as many as seven
million votes to switch over to Prabowo, which analysts say is
highly unlikely.
The KPU has been widely praised for the way it has conducted the
vote and many private counts give Jokowi a lead of around five
percentage points.
DEMANDS FOR DELAY
The Prabowo camp earlier demanded the commission delay its
announcement for two weeks so that the alleged cheating could be
investigated.
"The presidential election process done by the KPU is problematic
and not democratic," a combative Prabowo told a news conference in
Jakarta.
The confusion after Prabowo's late withdrawal was enough to rattle
Jakarta shares, which had been rising on expectations of a win by
Jokowi who is seen as more investor friendly.
At one stage the main index was down two percent on worries that the
increasingly shrill dispute could trigger violence. Prices later
recovered.
There have been no reports of major violence since the election.
Hundreds of thousands of police and military are on heightened alert
across the vast archipelago of 240 million people.
Companies canceled events and sent their employees home due to fears
of potential unrest, and Jakarta's normally congested roads were
quiet at the start of the afternoon rush-hour.
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"There are a lot of rumors of instability and unrest, but cautiously
I'm confident that it is implausible," said Tobias Basuki, a
political analyst at the CSIS think-tank.
Both sides have claimed victory in the closest presidential election
ever in Indonesia.
Outgoing President Susilo Bambang Yudhoyono has urged whoever loses
to quickly acknowledge the outcome to avoid violence.
"Admitting defeat is noble," the president told reporters on Monday,
in a clear reference to Prabowo.
CLEAN IMAGE Jokowi, born into poverty, has stormed his way to the
upper reaches of power with a clean image and a reputation for
competence in local government, in contrast with the autocracy,
corruption and power politics that have weighed down the country for
decades.
Prabowo's reputation as a strongman and his vow to reverse the
indecisiveness of the outgoing government won him a large following
among voters yearning for a return to old-style rule.
Candidates can lodge complaints with the Constitutional Court, as
did the losers of the previous two elections since strongman ruler
Suharto was forced to step down in 1998 after more than three
decades in power.
The Court must return a verdict on any challenge within two weeks
and it cannot be appealed.
"It is going to take a lot to push this to the Constitutional Court.
Prabowo's camp has to prove there was massive, systemic fraud,"
Basuki said.
Election officials said reports of irregularities had been
investigated, but the number of disputed votes is limited to
thousands of cases.
(Additional reporting by Kanupriya Kapoor, Gayatri Suroyo, Dennys
Kapa and Jonathan Thatcher; Writing by Randy Fabi and Jonathan
Thatcher; Editing by Mike Collett-White)
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