Rasheed, a legislator from Langate constituency of Kupwara district, withdrew his nomination for the by-election slated to be held on June 22, an official spokesman said.
Today was the last date for withdrawal of nomination.
With Rasheed's withdrawal, eight candidates, including Mehbooba, were left in the fray.
By-poll was necessitated in Anantnag following the death of then Chief Minister and incumbent PDP MLA Mufti Mohammad Sayeed on January 7.
The poll process has to be concluded before July 7, the day the six-month deadline, set as per provisions of the Representation of the People Act, expires.