Chelsea and Manchester City will leave the proposed Super League.
Chelsea, whose fans protested against the planned breakaway league outside Stamford Bridge ahead of Tuesday's Premier League match against Brighton, are understood to have changed their mind because of the overwhelming negative worldwide reaction.
According to Sky Sports' Kaveh Solhekol, the "totally negative reaction to ESL plans was in danger of totally overshadowing all the good work the club does in the community.
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"Chelsea made a last-minute decision last week to join the ESL. They now regret the decision and accept it was a mistake. They felt they had to 'jump on the train because it was leaving the station'. Turned out it was a train to nowhere."
City have also told organisers they do not wish to be a part of the Super League.
The Premier League leaders confirmed their position in a statement on Tuesday evening: "Manchester City Football Club can confirm that it has formally enacted the procedures to withdraw from the group developing plans for a European Super League."
The competition's announcement on Sunday, made by 12 founding clubs - including Manchester United, City, Liverpool, Chelsea, Arsenal and Tottenham from the Premier League - was met with widespread criticism.
Prime Minister Boris Johnson vowed to "thwart" the competition, likening it to a "cartel", while the other 14 Premier League clubs rejected the proposal and UEFA threatened potential sanctions on the rebel group.
Sky Sports News reported on Tuesday splits were emerging among the breakaway sides - despite one board member, speaking on the condition of anonymity, insisting "they will not back down".
Analysis: 'They just got it wrong'
Sky Sports' Graeme Souness:
"On the face of it, obviously it is great news. It's a domino effect and hopefully that's the end of it.
"They totally misunderstood the British passion and long family connections of supporting a football club.
"They just got it wrong."
FA: This has unified us all
The Football Association welcomed the news some clubs had decided to withdraw their support from the new competition.
An FA statement read: "English football has a proud history based on opportunity for all clubs and the game has been unanimous in its disapproval of a closed league. It was a proposition that, by design, could have divided our game; but instead, it has unified us all.
"We would like to thanks the fans in particular for their influential and unequivocal voice during this time, holding true the guiding principles of football. It is a powerful reminder that the game is, and always will be, for fans.
"We would also like to thank the Primer Minister, Secretary of State and Sports Minister for their unwavering and critical support against these plans."
Prime Minister commends Chelsea and City for pulling out
Earlier on Tuesday, Prime Minister Boris Johnson criticised the Super League plans, likening it "as a kind of cartel".
Following the news of Chelsea and City's exit from the proposals, Johnson tweeted: "The decision by Chelsea and Manchester City is - if confirmed - absolutely the right one and I commend them for it.
"I hope the other clubs involved in the European Super League will follow their lead."
The decision by Chelsea and Manchester City is – if confirmed – absolutely the right one and I commend them for it.— Boris Johnson (@BorisJohnson) April 20, 2021
I hope the other clubs involved in the European Super League will follow their lead.
Culture Secretary Oliver Dowden also tweeted: "Good news that Chelsea and City have seen sense, and I urge the rest to follow swiftly.
"The whole ESL move shows how out-of-touch these owners are. They have completely misjudged the strength of feeling from fans, players and the whole country. Football is for the fans.
"Our fan-led review will still happen and I remain convinced of the need for reform. We must make sure this never happens again."
Ceferin 'delighted' by City's withdrawal
UEFA president, Aleksander Ceferin welcomed the withdrawal of Manchester City from the breakaway closed league project.
He said: "I am delighted to welcome City back to the European football family.
"They have shown great intelligence in listening to the many voices - most notably their fans - that have spelled out the vital benefits that the current system has for the whole of European football; from the world beating Champions League final right down to a young player's first coaching session at a grassroots club.
"As I said at the UEFA Congress, it takes courage to admit a mistake but I have never doubted that they had the ability and common sense to make that decision.
"City are a real asset for the game and I am delighted to be working with them for a better future for the European game."
14 Premier League clubs reject Super League proposals
The 14 Premier League clubs not involved in the new European Super League "unanimously and vigorously" rejected plans for the breakaway competition on Tuesday afternoon.
The Premier League met without Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham to discuss the newly-announced competition at a virtual meeting.
The two-and-a-half-hour meeting, chaired by Premier League CEO Richard Masters, explored ways to collectively respond to the proposals.
A Premier League statement read: "The Premier League, alongside The FA, met with clubs today to discuss the immediate implications of the Super League proposal.
"The 14 clubs at the meeting unanimously and vigorously rejected the plans for the competition. The Premier League is considering all actions available to prevent it from progressing, as well as holding those Shareholders involved to account under its rules.
"The Premier League would like to thank supporters and all stakeholders for the support they have shown this week on this significant issue. The reaction proves just how much our open pyramid and football community means to people."