In a statement, Pearson said it held exploratory talks with GE about opportunities in business and financial information, including Dow Jones, and "has decided not to pursue a combination of CNBC, the Financial Times Group and Dow Jones".
Pearson said: "The two companies continue to discuss co-operating agreements between CNBC and the Financial Times Group."
The withdrawal now leaves Murdoch's News Corporation in a much stronger position to acquire Dow Jones with its $5bn bid.
General Electric, which owns US TV network NBC and business news channel CNBC, was understood to be re-examining the validity of the deal as early as the beginning of this week.
Earlier this week, Pearson released a statement confirming its interest in the group saying that the publisher had entered, "exploratory talks with GE about opportunities in business and financial information including Dow Jones".
The $5bn price tag for the publisher was said to be the sticking point for any potential approach, with Pearson and GE deeming the price to be too high.
Yesterday, Dow Jones & Company's board of directors took control of discussions with Rupert Murdoch's News Corporation for its $5bn (£2.5bn) bid to buy the company, from leading shareholders the Bancroft family.
The family, which controls 64% of Dow Jones' voting stock, and the board said in a statement that this would be the "best way" to evaluate the proposal, as well as other alternatives, including remaining independent.
"The board of directors, including representatives of the Bancroft family, will conduct further discussions with News Corporation relating to the proposal and will oversee the exploration of strategic alternatives."
The Bancroft family representatives said that any transaction must include "appropriate provisions with respect to journalistic and editorial independence" of Dow Jones's news operations.
The Bancroft family had already rejected News Corps offer on the grounds of the level of editorial independence the group would maintain.
With this, Murdoch stepped up plans to buy the company by offering the Bancroft family seats on the News Corp board, and proposed the creation of an independent editorial board for The Wall Street Journal.
Subsequently, the Bancrofts met Murdoch to discuss terms of a takeover and talks have been ongoing.
Murdoch's News Corp submitted its unsolicited bid in early May, which valued Dow Jones at $5bn, or $60 a share, representing a 67% takeover premium.
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