The move leaves Oslo alongside Beijing and Almaty, Kazakhstan as potential hosts. Lviv is the third city to pull out of the running, joining Stockholm and Krakow, Poland.
Lviv will now focus on a bid to host the 2026 Winter Olympics after a meeting with the head of the International Olympics Committee (IOC) Thomas Bach, the Ukraine prime minister Arseniy Yatsenyuk and the leader of the Olympics Committee of Ukraine, Sergey Bubka.
"We wish to thank IOC for their help and understanding, and also for their great effort in helping Ukraine athletes both morally and financially," Bubka said, according to NTB.
The decision was made in response to the current political and economic crisis in Ukraine.
Oslo's bid is also uncertain. The Norwegian government has yet to back the project and will make a decision later this year. In addition, recent polls have shown that more than half the country's population does not back the games.