"I have concluded that New York state cannot successfully address this problem on its own," Spitzer said at a news conference in Washington.
The Democratic governor said overwhelming public opposition to the plan led to his decision.
"You don't need a stethoscope to hear the heartbeat of the public on this one," said Spitzer, adding: "There are some moments where emotions are simply too hot," according to the Associated Press.
Spitzer introduced the driver's license plan in September with the goals of safer roads, improved security and the chance to bring immigrants "out of the shadows."
But opponents felt the plan would make it easier for potential terrorists to gain identification and could have a negative impact on national security.
Spitzer's plan also sparked a national debate over the extension of certain rights to illegal immigrants and surfaced on the 2008 campaign trail after Democratic presidential hopeful New York Sen. Hillary Clinton was asked about the plan during a candidate debate.
Clinton faced criticism from her Democratic and Republican rivals for not taking a specific position on Spitzer's plan. She has said she sympathizes with governors like Spitzer who are forced to confront immigration issues because the federal government has not enacted immigration reform, the AP reported.
About 70 percent of New Yorkers opposed the plan, according to a Siena College poll of 625 registered voters released Tuesday. The poll, conducted Nov. 5-8, had a sampling error margin of 3.9 percentage points.
Last month, Spitzer hoped to salvage the license plan by striking a deal with the Department of Homeland Security to create three different types of state driver's licenses: one "enhanced" card that would be as secure as a passport; a second-tier license valid for boarding airplanes; and a third marked "not valid for federal purposes" that would be available to illegal immigrants and others.
Spitzer said he still believed his plan would be the best way to secure the roads in a state with an estimated 1 million illegal immigrants, many of whom drive without licenses or insurance, according to Reuters.
He also criticized the federal government for leaving states to handle immigration issues. Congress failed to pass a proposed overhaul of immigration laws earlier this year.
"The federal government has lost control of its borders, has allowed millions of undocumented immigrants to enter our country and now has no solution to deal with it," he said at the news conference, where he was joined by Democratic lawmakers from New York.