In a statement read out by his campaign manager, Ahmed Ghneim, West Bank Fatah leader Barghouti said he wanted to act in the "national interest" and back Abbas who is the official candidate for the dominant Palestinian faction.
"I again stress my support to brother Abu Mazen [Abbas], the nominee of the movement who is a dear friend and somebody who deserves the position of president," his statement said.
"I wish him every success in his mission on the road to achieving freedom, the return [of refugees], independence, peace and national democracy."
Barghouti had been under massive internal and international pressure to withdraw from the campaign, after his candidacy threatened to split Fatah down the middle and derail hopes of progress in the Middle East peace process in the aftermath of Palestinian leader Yasser Arafat's death on November 11.
The 45-year-old firebrand, handed five life sentences in June for his part in deadly anti-Israeli attacks, angered and astonished Fatah's leadership on December 11 when he announced his candidacy just hours before the close of nominations.
He has since been threatened with expulsion from Fatah and the Israeli government had made clear that they would not contemplate his early release from prison.
US Secretary of State Colin Powell had also called his nomination "problematic", while European donors had made behind-the-scenes threats to slash aid if he were to become head of the Palestinian Authority.
While Barghouti is seen as the father of the intifada, Abbas has carved out a reputation as a leading moderate and has been an outspoken critic of the militarization of the Palestinian struggle against Israeli occupation.
In his statement Barghouti insisted that Abbas remain committed to "the national principles", demanding among other things that he campaign for the creation of a Palestinian state with East Jerusalem as its capital and for the release of all Palestinian prisoners.
He also urged the Palestinians "to hold onto the option of intifada and resistance and to combine it with negotiations".
Barghouti's change of heart came after several visits to his prison cell in recent days by some of his closest supporters, including Ghneim and the inmate's wife, Fadwa.
Ghneim said that Barghouti's initial candidacy had managed to advertise the plight of Palestinian prisoners being held in Israeli prisons.
"By nominating himself, Marwan delivered a message reminding everybody that Palestinians are still under occupation and running elections in such circumstances is not a natural situation," he said.
© 2004 Agence France-Presse