Ineos Grenadiers announced early on Wednesday morning that the 23-year-old Colombian, "will now focus on his recovery from the Tour, and reset his goals for the remainder of the season".
After holding his own for the first two weeks of the race, and holding the white jersey as best young rider for six stages, Bernal cracked on the climb of the Col du Grand Colombier during stage 15 on Sunday.
Following Monday's rest day, Bernal lost further time to his overall rivals on stage 16, and was lying 16th overall, 19-04 down on race leader Primoz Roglic (Jumbo-Visma) on Tuesday evening.
Ineos Grenadiers team principal Dave Brailsford said the decision had been taken "with Egan's best interests at heart".
"Egan is a true champion who loves to race, but he is also a young rider, with many Tours ahead of him, and at this point, on balance, we feel it is wiser for him to stop racing," Brailsford said.
Brailsford had said before Tuesday's stage that the plan was for Bernal to continue to Paris, but it would appear that his condition is now such that that is no longer feasible.
Bernal added: "This is obviously not how I wanted my Tour de France to end, but I agree that it is the right decision for me in the circumstances. I have the greatest respect for this race and I'm already looking forward to coming back in the years ahead."
After Tuesday's stage, Bernal described himself as "screwed up on all sides", according to Spanish sports daily AS.
"I was suffering all day with back pain, and it was increasing. On the last climb, it switched to my knee. I'm screwed up on all sides," he said.
The Colombian's abandon underlines how difficult this Tour is proving for Ineos Grenadiers, and is in stark contrast to their years of dominating the race as Team Ineos and Team Sky, winning seven of the past eight Tours with Chris Froome, Geraint Thomas and Bernal.
There will inevitably be speculation about whether Bernal will now refocus on the Vuelta a España, but that remains to be seen. As things stand, double Vuelta winner Froome will be Ineos Grenadiers' sole leader for the Spanish Grand Tour.
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