At a news conference in Washington following a meeting with New York's congressional delegation, Spitzer said New York cannot address the problem on its own.
Spitzer estimates New York is home to 1 million illegals, many of whom are driving without licenses or insurance.
"I continue to believe that my proposal would have improved an unsatisfactory situation, but I have listened to the legitimate concerns of the public and those who would be affected by my proposal and have concluded that pushing forward unilaterally in the face of such strong opposition would be counterproductive," Spitzer said.
Spitzer accused the federal government of abdicating its responsibility on the issue and of having lost control of the nation's borders. He issued a challenge: "Fix it. Fix the problem so states won't face the local impact."
Spitzer said he was appalled by the level of vitriol his proposal generated.
"Political opponents equated minimum-wage undocumented dishwashers with Osama bin Laden," he complained. "Newspaper headlines equated a driver's license for an undocumented migrant worker with a passport to terror and a license to kill. … I feel confident in saying that his rhetoric is wildly out of step with mainstream values, doing nothing to offer solutions and everything to exploit fear."