"I informed Governor Paterson today that for personal reasons I am withdrawing my name from consideration for the United States Senate," she said in the one-sentence statement.
Her spokesman, Stefan Friedman, wouldn't comment further. A spokesman for Gov. David Paterson, who will make the appointment to the open seat, also would not comment.
The U.S. Senate seat was once held by Kennedy's slain uncle, Bobby Kennedy, and her initial announcement that she wanted to be considered was met with both excitement from supporters and skepticism from those who maintained that she was simply trading on her famous name to get into public office.
Her uncle, Sen. Edward Kennedy, suffered a seizure Tuesday at the inauguration of President Barack Obama. The veteran lawmaker has been treated for an aggressive brain tumor.
The New York Times cited a source it didn't identify as saying his niece withdrew out of concern for her uncle and his illness. But the New York Post, which was the first to report his niece's withdrawal from the Senate contest, cited an unidentified source as saying she dropped out because she learned Paterson had decided not to choose her.
The Associated Press initially reported Kennedy had withdrawn from the race Wednesday evening, but corrected the story about an hour later after the person who gave that information said it was an error. Kennedy later issued her statement saying that she would withdraw, hours after Clinton became head of the U.S. State Department.
Kennedy's decision boosted the chances of several other candidates, including Attorney General Andrew Cuomo, who surpassed Kennedy in statewide polls last week.
Paterson said Cuomo had outstanding credentials for the job. Cuomo was the housing secretary under President Bill Clinton. Cuomo was elected attorney general in 2006 and has since led national reforms in the student loan industry and had a role in reining in corporate spending on Wall Street.
Cuomo is also the most popular elected politician in New York in polls -- higher than Paterson, whose approval rating, while still high, has been slipping.
Paterson has asked potential candidates to respond to a 28-page questionnaires. The forms ask about personal finances and other background issues, many of which Kennedy has long shielded from the public.
Kennedy, an author, lawyer and fundraiser for New York City schools, has long guarded her privacy, and the questionnaires were expected to include some closely guarded Kennedy financial data. Paterson had said he thought the candidates' responses would be confidential because it was his personal request that they fill them out.
But the state's open-government expert and good-government groups told the AP that once the forms were written and submitted to the governor at least some of the responses would be subject to public review under the state Freedom of Information Law.
Kennedy jumped to the top of statewide polls in early December, but her public support waned following a brief upstate tour and a few press interviews.
She was criticized as reluctant to answer questions, and her knowledge of New York and its issues were suspect. She was also mocked nationwide for her frequent use of "you know" and "um" in interviews and was branded a lackluster campaigner.
In addition to Cuomo, other contenders include Reps. Carolyn Maloney, of New York City, and Steve Israel, of Long Island, along with a strong upstate candidate, Rep. Kirsten Gillibrand, whose district runs along the Hudson Valley. Other hopefuls among the 10 or 20 Paterson said were under consideration include U.S. Reps. Jerrold Nadler and Brian Higgins and Buffalo Mayor Byron Brown.
The Kennedy reports came hours after Maloney, some Democrats' top choice, was named chair of the Joint Economic Committee in Congress. That's a significant move because Paterson had made it clear the next senator's top job should be to help land a federal stimulus package to help New York out of its historic fiscal crisis.