Hollande finally caved in on Thursday after realizing he would not have enough support from within his own Socialist party to push through the constitutional reform.
While his plan to enshrine emergency powers in the constitution, like those brought in after the Paris terror attacks, received enough cross-party support, the move to strip convicted terrorists of the French passports was divisive.
"A compromise appears out of reach," Hollande said after the two houses of parliament failed to agree on the reforms that the president tabled just days after 130 people were killed by terrorists, some of whom had dual French nationality.
"I also note that a section of the opposition is hostile to any constitutional revision. I deeply regret this attitude," he said.
Hollande pledged that despite dropping the reform plans, he would not "deviate from the commitments I have taken... to ensure the security of our country.
"The threat remains higher than ever," said Hollande.
"Islamist terrorism has declared war against us, against France, Europe, the entire world."
Any reforms to France's constitution have to be given the backing by three fifths of all lawmakers - MPs and Senators - at a special Congress of Versailles that was due to be held next month. But with Wednesday's U-turn Hollande will no longer need to summon the Congress.
Without enough support Hollande faced the prospect of an embarrassing defeat which would have surely scuppered any remaining chances he had of being re-elected in 2017.
Hollande's announcement after a cabinet meeting brings to an end months of debate on a reform for which he was widely criticized by members of his own party, for whom he is far from popular. Former Justice Minister Christiane Taubira resigned because she could not support the stripping of citizenships from convicted French jihadists.
However, opinion polls suggested the move did have wide support among the public.
Most critics said the measure would do little to prevent terror attacks, while others pointed out it would make matters worse by stigmatizing sections of the population - notably Muslims of North African descent - and may push them into hands of extremists.
Rights groups also criticized the plan to enshrine draconian powers under the state of emergency, but Hollande and his PM Manuel Valls argued it was an essential step to protect the nation at a time when France could face another jihadist attack.
Those on the right supported the move, which had long been backed by the far-right National Front.
The leader of the far-right National Front (FN), Marine Le Pen, said Hollande's decision to scrap the constitutional reform was "a historical failure".
"Francois Hollande fails to have his own words taken seriously. He and his government are the only ones responsible for this failure," Le Pen said.
Hollande came close to dropping the plan to strip jihadists of the nationality once before, but was forced to push ahead with it when it emerged if he did then right-wing lawmakers would not back his second wish - to enshrine emergency powers in the constitution.
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The plan to enshrine emergency powers in the constitution, such as a ban on protests and the power to carry out house searches and impose house arrest orders without judicial oversight, was also widely criticized.
Amnesty International was particularly unimpressed with France's response to the January and November terror attacks in Paris, referring to the reaction as "liberticide" (killing off freedom).
Many pointed out that France already had the necessary legal means to impose emergency powers so there was no need to change the constitution.