Rice had been considered the frontrunner for the post, which Secretary of State Hillary Clinton plans to vacate.
But Rice recently drew heavy criticism from Republicans for describing the September attack on a U-S consulate in Libya as spurring from a protest -- instead of as a deliberate act by terrorists.
Rice said her comments were based on declassified talking points.
But Republicans accused her of knowingly misleading the public.
In a letter to President Obama, Rice says her "confirmation process" to become secretary of state would have been too "disruptive" to him and the nation's priorities.