In a statement released by the White House on Tuesday, Daschle said that "if 30 years of exposure to the challenges inherent in our system has taught me anything, it has taught me that this work will require a leader who can operate with the full faith of Congress and the American people, and without distraction."
"Right now, I am not that leader, and will not be a distraction," he said.
Daschle's withdrawal is unlikely to derail a healthcare reform movement that started gathering steam before Obama was elected.
"If anything, there's more urgency for us to keep up the momentum," said Senate Finance Committee Chairman Max Baucus (D-Mont.), one of the leading architects of planned health reform.
Skyrocketing healthcare costs, the growing ranks of the uninsured and increasing concern among business organizations about the cost of offering medical benefits have been driving groups long at odds into more cooperative positions.
And on Capitol Hill, senior lawmakers have been moving ahead with plans for legislation that would advance many of the goals Obama and Daschle had talked about.
But completing that process will probably be harder without Daschle, who was popular with lawmakers on both sides of the aisle and was seen as a consensus builder who could help shape the kind of grand compromise many think will be necessary.
The soft-spoken South Dakota Democrat served 10 years as the party's leader in the Senate during a 26-year legislative career.
After leaving Congress, he became a champion of healthcare reform while building relationships with interest groups crucial to the debate.
Now Obama will have to find a new person to carry forward his most ambitious policy agenda. The selection process will probably take time, White House officials said, especially given the necessity for close examination of candidates' backgrounds.
Few of the people mentioned as possible replacements for Daschle would bring his level of experience on Capitol Hill.
A number of candidates -- including Kansas Gov. Kathleen Sebelius, who is widely respected for her work on healthcare -- have never served in Washington.
Inexperience was considered a major handicap for the Clinton administration, which was full of Washington outsiders who proved unable to thread the White House's healthcare plans through the capital's political culture.
Obama acknowledged his challenge in an interview with ABC News.
