A statement from national governing body Football Federation Australia (FFA) and world governing body FIFA said the decision had been taken due to a "growing movement" for the 2018 event to be held in Europe.
FFA chair Frank Lowy said: "We have been in discussion with FIFA for months and it is that trusting relationship with the leadership of the governing body that has caused us to focus on 2022 and decide to leave the field for 2018 to European contenders."
Jerome Valcke, chief executive office of FIFA, added: "The FFA were among the very first to enter into an open and constructive dialogue with me after it became apparent that there was a growing movement to stage the 2018 World Cup in Europe."
Australia's decision means it is now one of four countries concentrating solely on securing the 2022 World Cup, as well as Qatar, South Korea and Japan, which withdrew its 2018 bid in May.
England, Russia, Spain/Portugal and Belgium/Netherlands are among the European bidders for the 2018 tournament, although the US is still in the running.