The anti-system "There is such a people" party (ITN) announced on Tuesday that it will not submit its minority government for parliamentary approval.
Bulgaria could be heading for its third general election of the year after the winner of the July ballot failed to strike a coalition deal.
On Thursday, MPs voted to allow the "There Is Such a People" party (ITN) to withdraw its proposed government.
The unprecedented vote took place after the ITN designate for prime minister, Plamen Nikolov, formally withdrew his nomination.
The anti-establishment party was meant to submit its minority government for parliamentary approval on Wednesday, but its president, Slavi Trifonov, announced on Tuesday that they "will not go to the vote with our list" and that this "means that there will be new elections."
ITN narrowly won the last election in July, securing 65 seats out of a total of 240.
The election was called after the centre-right GERB party of former prime minister Boyko Borissov failed to form a coalition following the April ballot.
Negotiations with other anti-corruption parties were not successful and ITN initially decided to form a minority government. It handed over its list of proposed ministers to Bulgarian President Roumen Radev last week.
Radev can now call on the other parties to try to form a government but Trifonov, a satirical TV host and singer with no political experience, has already announced that he will not support any of them.
If this scenario is confirmed, it will be the third election of the year in this Eastern European country, which has been plunged for months into a political crisis unprecedented since the end of the communist regime.
It could also coincide with the presidential election, scheduled to be held in the autumn. Radev, a fervent opponent of Borissov, is running for a new mandate and will be supported ITN, Trifonov said in a surprise statement on Tuesday.