Tancredo, a five-term congressman from Colorado, had based his campaign on fighting illegal immigration and has run television ads that link lax border control to terrorist attacks, rape and other crimes. He has consistently polled at the bottom of the nine-person Republican field.
He announced his withdrawal two weeks before Iowa begins the presidential nominating process with the precinct caucuses.
Tancredo, who has consistently polled at the bottom of the nine-man Republican field, said he decided to drop out in part because of concern that his presence could split the vote for other candidates who have taken a hard line on immigration, helping those who would take a less restrictive approach.
"I fear remaining in this race, one which I cannot win, would contribute to the nomination of one of these candidates," he said.
In the latest CBS News/New York Times poll, Tancredo received just among Republican primary voters nationwide.
In Iowa, he received among likely caucus goers in a CBS News/New York Times poll last month.
Tancredo identified and as two Republican candidates whose records indicate they wouldn't be tough enough on immigration.
"We have done too much, we have come too far for me to allow that to happen," Tancredo said.
Romney was campaigning in Iowa and planned to make a statement later Thursday.
Tancredo said he and Romney met Thursday for more than an hour and he left the meeting convinced that the former Massachusetts governor would do what's necessary to fight illegal immigration.
None of the other candidates hit the issue as hard as Tancredo. One of his campaign ads showed a man in a hooded sweat shirt with a backpack in a crowded mall. The screen goes dark at the sound of an explosion, then shows clips of the aftermath of terrorist acts in Europe.
Dennis Goldford, a political science professor at Drake University in Des Moines, said Tancredo forced his GOP rivals to talk about immigration.
"What Tancredo has done is analogous to what a third-party candidate does," Goldford said. "They call attention to and articulate an issue that the other two main parties neglect or don't see" and then after forcing the issue they disappear.
Tancredo announced in October that he would not seek a sixth term in Congress, but hinted he would consider running for the Senate after his presidential bid.
Colorado will have an open Senate seat next year when Republican Wayne Allard retires.
Fears about illegal immigration boosted Tancredo's profile, but it didn't translate into support as reflected by his low standing in national and state polls and his limited fundraising. In part, candidates such as Mitt Romney and Rudy Giuliani usurped Tancredo's hardline stance on the issue, prompting the congressman to quip at one debate that "all I've heard is people trying to out-Tancredo Tancredo."
Tancredo drew criticism for a controversial campaign ad that showed a man in a hooded sweat shirt with a backpack in a crowded mall. The screen goes dark at the sound of an explosion, and then the ad shows clips of the aftermath of terrorist acts in Europe, including a picture of a bloodied child.
"There are consequences to open borders beyond the 20 million aliens who have come to take our jobs," a narrator says. "Islamic terrorists now freely roam U.S. soil, jihadists who froth with hate, here to do as they have in London, Spain, Russia. The price we pay for spineless politicians who refuse to defend our borders against those who come to kill."
"I approve this message because someone needs to say it," Tancredo says at the beginning of the ad. (Click here to read more and watch the ad.)
Tancredo took credit in July for some of the political woes that have befallen McCain, once the front-runner in the GOP race. Tancredo has hammered McCain in Iowa and other states for supporting a failed immigration bill in Congress that would have legalized millions of immigrants now in the country.
The grandson of an Italian immigrant, Tancredo says he became angry about illegal immigration because of bilingual education requirements in schools. He says those requirements turned out students who were illiterate in two languages.
Tancredo wants the military to patrol U.S. borders and employers to be required to prove a need for short-term foreign workers.
Never shy about stirring controversy, Tancredo told a radio talk-show host that "you could take out" Islamic holy sites should terrorists ever launch a nuclear attack against the United States.
When asked if he meant bombing holy sites like Mecca, Tancredo answered: "Yeah" and said he was "just throwing out some ideas."