Seoul, South Korea (CNN) -- South Korean presidential candidate Ahn Cheol-soo announced Friday that he is dropping out of the race, clearing the way for fellow left-leaning hopeful Moon Jae-in to face Park Geun-hye, the candidate for the governing Saenuri Party.
Ahn had been working with Moon, of the Democratic United Party, to merge their presidential bids ahead of next month's election, but the two had failed to reach an agreement.
"I am giving up my presidential candidacy," South Korean news agency Yonhap quoted Ahn as saying. "From now on, Moon Jae-in is the single liberal candidate."
The race will determine who will lead South Korea, a key U.S. ally in Asia, for the next five years amid long-running tensions with the unpredictable, nuclear-armed North.
The current South Korean president, Lee Myung-bak of the Saenuri Party, is prevented by the constitution from running for another term.
Both Park and Moon are expected to pursue a more conciliatory line toward North Korea than Lee, who took an uncompromising approach to dealings with Pyongyang.
Popular among conservative voters, Park has said she aims to focus on welfare policies. If elected, she would become the country's first-ever female president.
She is a daughter of former president Park Chung-hee, who stirs mixed feelings among South Koreans. Some claim he was a dictator who stifled opposition; others credit him with overseeing a key phase of South Korea's economic development. He was shot and killed by his intelligence chief in 1979.
Ahn, who founded an anti-virus software company, had gained popularity for his criticism of the large South Korean conglomerates, known as "chaebols." He has argued that the nation's economy is dominated by a few rich individuals.
He is a professor at South Korea's prestigious Seoul National University and a former medical doctor.
Moon, a close ally of late president Roh Moo-hyun, is a former human-rights lawyer who was jailed in the 1970s by Park's father.
CNN's KJ Kwon contributed to this report.