This leaves just one bidder in the running for the State contract
Eir has pulled out from the National Broadband Plan bid.
The board of the company cited a number of issues behind the decision in a letter to Communications Minister Denis Naughten.
It leaves just one bidder in the running for the State broadband contract, enet.
Last year Siro - a joint venture launched by Vodafone and the ESB - also pulled out of the process.
Communications Minister Denis Naughten said in a statement: "One bidder, Eircom Limited (eir), has formally communicated to my department that it is withdrawing from the procurement process.
"I understand their decision is driven by 'commercial, regulatory and governance' issues.
"This decision is ultimately a commercial matter for eir.
"The NBP procurement process was launched in December 2015 and eir actively engaged with the process since then.
"The company invested significant time and resources to the process and their withdrawal from the process at this late stage is regrettable."
Currently, eir is rolling out high speed broadband to over 300,000 premises in rural Ireland.
Minister Naughten said this rollout is the subject of a binding agreement, "whereby eir has committed to building high speed broadband infrastructure to serve these 300,000 premises."
He said eir has reconfirmed its commitment to this commercial investment, as well as their ongoing investment in broadband nationally.
The remaining bidder, the enet-SSE consortium, has confirmed its "continued commitment and engagement" with the Department of Communications on the National Broadband Plan (NBP).
The consortium is made up of enet and its shareholders, as well as SSE plc, Ireland's second largest energy utility, and John Laing Group plc, the international originator, active investor and manager of infrastructure projects.
David C McCourt, chairman of enet, said: "enet has been dedicated to the NBP since the first days of consultation, and the fact that we have assembled this world-class consortium reflects our continued commitment to Ireland and our understanding of the importance, scale and complexity of this project.
"We have brought together global expertise in building networks, particularly in telecoms, and in co-ordinating all the elements required to finance a project of this size and complexity in partnership with Government.
"To this end we have added world-leading investors and funds committed to the development of social infrastructure around the world."
"We recognise that this procurement is long and complicated but we look forward to our continued engagement with the department on the remainder of the process."
The National Broadband Plan was published back in August 2012.
The Government-wide initiative was to deliver high speed broadband services to all businesses and households in Ireland.
'High speed broadband' is defined as a minimum speed of 30Mbps download and 6Mbps upload.
This was to be achieved through a combination of commercial investment by the telecommunications sector and State intervention in those areas where commercial providers acting alone will not provide this essential service.
Amber coloured areas on the map (above) are the target areas for the State intervention of the National Broadband Plan, subject of an ongoing procurement process.
Blue areas are where commercial operators are delivering or have indicated plans to deliver high speed broadband services.
Light blue areas are where eir has committed to commercial rural deployment plans to rollout high speed broadband to 300,000 premises by the end of 2018.
Sinn Féin communications spokesperson Brian Stanley has claimed the process is now "in tatters".
"Eir’s shocked withdrawal from the National Broadband Plan means government plans to connect every home in the state to high speed broadband is in complete chaos.
"This is on the back of the withdrawal last year of Siro leaving then just two bidders left, Eir and enet.
"This now means that the privatisation option has proven flawed. We warned government consistently of the flaws in the whole procurement system.
"One of the worst aspects of this whole process is that Eir were allowed to cherry pick the 300,000 ‘easy to reach’ households in rural Ireland."
Fianna Fáil communications spokesperson Timmy Dooley said the writing was on the wall for the plan as soon as Siro decided to pull out.
"Some people believe that the Government has complicated the process so much that it has become next to impossible for potential bidders to respond in a commercially viable way.
"The question that Government need to answer is are they serious about rolling out broadband to rural communities, and are they prepared to pay for it?
"This represents an unmitigated failure on the part of government, and leaves over 540,000 households in serious limbo", Deputy Dooley said.
And Green Party leader Eamon Ryan said: "To lose one bidder for the national broadband scheme was unfortunate.
"To lose two is carelessness. The Government are asleep at the wheel, and the whole scheme has been thrown into disarray."
Additional reporting: Sean Defoe and Jessica Kelly