The Italian Rugby Federation (FIR) says it withdrew its bid for the 2023 Rugby World Cup because it was unable to provide "necessary commitments" to continue in the process.
Italy was one of four nations alongside Ireland, South Africa and France in the running to host the tournament.
However, it was confirmed on Wednesday that the FIR no longer wishes to be considered.
The news comes just a week after Rome withdrew as a candidate to host the 2024 Olympic Games.
FIR president Alfredo Gavazzi says the two bids were connected and, while convinced hosting the tournament would have provided many benefits, he accepts the decision was inevitable.
"Our nomination has always been strictly connected to the Olympic Games bid for Rome in 2024 and, as agreed with the Government and the Olympic Committee, we are unable to provide the necessary commitments for us to move forward," he said.
"We remain convinced of the strength of our bid and are well aware of the benefits that hosting the Rugby World Cup would have brought to Italy. We're conscious to lose a fantastic chance to promote our values and our sport in our country, but we must sadly accept that we can no longer move forward with our bid.
"I'd like to thank the Olympic Committee President Giovanni Malago, who has supported our bid right from the start. We know he's disappointed, as we are, for losing such a great chance. I'd also like to thank the venues and the municipalities who showed great interest in being part of the bid."
World Rugby added in a statement: "World Rugby notes the decision by the Federazione Italiana Rugby today to withdraw from the Rugby World Cup 2023 host selection process.
"While it is disappointing that the FIR feels unable to proceed, World Rugby fully understands the decision and hopes to see Italy join the process for future Rugby World Cup hosting.
"The host selection process continues with three strong applications currently being evaluated by a World Rugby Technical Review Group.
"The outcomes of the evaluation will be independently assessed to ensure a fair and consistent approach. Applicants that meet the criteria outlined will move to the candidate phase on 1 November. The Rugby World Cup 2023 host will be selected in November 2017."
The World Cup is expected to return to Europe in 2023 with the 2019 edition to take place in Japan.