Sharif said his main coalition partner, the party of assassinated former Prime Minister Benazir Bhutto, which leads the coalition, had broken promises on resolving a judicial dispute and on who should be the next president.
"We therefore feel that these repeated defaults and violations have forced us to withdraw our support from the ruling coalition and sit on the opposition benches," Sharif said.
The departure of his party is not expected to force a general election as Bhutto's Pakistan People's Party should be able to gather enough support to govern, analysts say.
The coalition, formed after former President Pervez Musharraf's allies lost a February parliamentary election, had looked increasingly precarious since Musharraf resigned a week ago.
Sharif's party repeatedly threatened to leave the coalition if judges Musharraf purged last year were not restored to office.
The PPP announced on Saturday that Bhutto's widower and political successor, Asif Ali Zardari, would be its candidate.
Sharif named his party's candidate for president, a former chief justice, Saeeduzzaman Siddiqui.
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