Iranian state-funded broadcaster Press TV said former president Ayatollah Ali Akbar Hashemi Rafsanjani decided to withdraw his candidacy for head of the Assembly of Experts.
The Assembly of Experts is tasked with monitoring and appointing the country's supreme leader. Iranian lawmakers overwhelmingly threw their support behind conservative Ayatollah Mohammad Reza Mahdavi Kani to head the body, Iranian media reports.
Ahmad Bakhshayesh, a political scientist in Tehran, told the Los Angeles Times that the question now was whether Rafsanjani "will be the next dissident (cleric) or not."
Rafsanjani came under fire from the conservative leadership for backing opposition leader and former Prime Minister Mir Hossein Mousavi during the June 2009 elections.
Officials in Tehran blamed the former president for fanning the "fires of dissent" for his support of the opposition movement in Iran.
The former president boycotted the inauguration of President Mahmoud Ahmadinejad in protest of his disputed victory in 2009.
Rafsanjani lost to Ahmadinejad in 2005 in an election plagued by allegations of voter fraud.