"I'm withdrawing from any consideration of being the Democratic Party's nominee," Webb told reporters in Washington.
"How I remain as a voice will depend on what kind of support I am shown in the coming days and weeks as I meet with people from all sides of America's political landscape."
Webb, 69, is a decorated former US Marine who fought in Vietnam and served as Republican president Ronald Reagan's secretary of the navy in the 1980s. He then joined the Democratic Party and was elected to the Senate in 2006, serving one term.
Webb pointed to the intense challenges he faced in "creating an organization inside a Democratic Party where the expected nominee had a lot of control, a lot of leeway."
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And he stressed he was essentially iced out of much of last week's Democratic debate, where he said he received 14 minutes of air time compared with Clinton's 32 minutes.
"I wouldn't say that that was a fair process," Webb said, with his Vietnam-born wife by his side.
But he insisted he would have a better chance of raising all-important campaign funds, particularly from sources who did not fall within the existing political party structure but who, according to Webb, have encouraged him to run as an independent.
"Our political process is jammed up. It needs an honest broker," he said.