Lviv pulled out because of the continuing political and security crisis in Ukraine, where government forces are battling an insurgency by pro-Russian separatists.
Lviv officials said they would now focus on bidding for the 2026 Winter Games instead.
The decision to withdraw, which had been widely expected, followed talks between Ukrainian prime minister Arseniy Yatsenyuk and IOC president Thomas Bach.
“We concluded that it would be extremely difficult to pursue the 2022 bid under current circumstances but that a future bid would make sense for Ukraine and Ukrainian sport,” Bach said in a statement.
The announcement came exactly one week before the International Olympic Committee selects a short list of finalists for the 2022 Games.
Three cities remain in contention: Almaty, Kazakhstan; Beijing and Oslo.
With Lviv out, the IOC is likely to retain all three and not cut any of the candidates. The host city will be selected by the full IOC in Kuala Lumpur, Malaysia, on 31 July, 2015.
“We have always said that we will only continue if we can be certain to deliver on all our promises,” Lviv bid CEO Sergei Goncharov said.
“Due to the current circumstances in Ukraine, however, we felt that a bid for 2026 would make more sense. We remain convinced of the positive impact that hosting Olympic Games would have for the city of Lviv and the whole country.”
Lviv’s withdrawal follows the earlier pullouts of Stockholm and Krakow, Poland.
The Swedish capital dropped out in December after politicians declined to give financial support.
The Polish city withdrew last month after 70 per cent of residents rejected the bid in a referendum.
The future of Oslo’s bid also remains uncertain. The Norwegian government has yet to back the project and won’t make a decision until the autumn. In addition, recent polls have shown that more than half the population opposes the games.
If Oslo drops out later, that would leave only two cities standing. Almaty, commercial capital of the former Soviet republic of Kazakhstan in central Asia, hosted the 2011 Asian Winter Games and would shape up as the favourite. Beijing, which hosted the 2008 Olympics, is bidding to become the first city to stage both the Summer and Winter Games.
Beijing proposes holding Alpine events 120 miles (190 kilometers) away in the northern Chinese city of Zhangjiakou. And with Pyeongchang, South Korea, hosting the 2018 Winter Games and Tokyo the 2020 Olympics, the IOC would normally be reluctant to send the games to Asia for a third straight time.
Potential host cities, especially in western Europe, are concerned about the financial costs of the games. Many have been scared off by the £29.8 billion price tag associated with February’s Winter Olympics in Sochi. Russia spent much of the record sum on long-term infrastructure projects for the entire region.
Rio de Janeiro’s delayed preparations for the 2016 Olympics are also a major concern.
Changes to the bidding process and efforts to reduce the cost of the games are among the key issues being addressed by the IOC as part of Bach’s “Agenda 2020” – his blueprint for the future of the Olympic movement that will be voted on in December.