The right wing populist Progress Party adopted a resolution during its congress which said hosting the Olympics would be too costly and draw funds from essential areas such as healthcare and education.
"Believing that the Oslo Olympics would cost under 50 billion kroner $8.5 billion, 6 billion euros) is like believing in Santa Claus, when the Sochi Olympics cost 500 billion," Atle Simonsen, head of the party's youth wing, told public broadcaster NRK.
Another delegate, Per Sandberg, said the decision put an end to Oslo's Olympic plans, which can only go ahead now if the main governing party Hoyre get the support of the opposition Labour party.
Oslo's rivals to host the 2022 Games are Krakow in Poland, Lviv in Ukraine, Beijing and Almaty in Kazakhstan.
All five cities submitted formal bids to the International Olympic Committee (IOC) in February.
The Norwegian capital was seen as a favourite due to the popular success of the 1994 Winter Games held in Lillehammer. Oslo's was not the only bid to be jeopardised by financial qualms.
The Swedish capital, Stockholm, which had also said it wanted to host the Games, withdrew from the race in January after the bid was vetoed by municipal officials worried about the burden hosting the event would have on taxpayers.
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After studying the bid files, the IOC executive committee is set to pick the finalist cities at a meeting on July 7-9 at its headquarters in Lausanne.
The finalists will then have several months to flesh out their projects before handing in a complete candidature dossier by January 2015.
The host city will be elected at the 127th IOC session in Kuala Lumpur on July 31, 2015.