Twenty-First Century Fox chairman and CEO Rupert Murdoch said in the statement that the proposal had "significant strategic merit," and its approach had "always been friendly." But he said Time Warner's refusal to accept an $80 billion offer, coupled with other factors, led to his decision to withdraw the proposal.
"The reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders," he said. "These factors, coupled with our commitment to be both disciplined in our approach to the combination and focused on delivering value for the Fox shareholders, has led us to withdraw our offer."
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Time Warner stock dropped more than 12 percent in after market trading on the announcement. Fox shares jumped almost 8 percent.
Time Warner is "committed to enhancing long-term value and we look forward to continuing to deliver substantial and sustainable returns for all stockholders," the company said in a separate statement.
Fox also announced that its board had authorized a $6 billion share repurchase program.
"This significant return of capital underscores the Company's ongoing commitment to disciplined capital allocation and returning value to shareholders in a meaningful way," Murdoch said in the statement.
This story is developing. Please check back for further updates.
—By CNBC staff