Citing "philosophical" differences, Intel has withdrawn its funding and technical help from the One Laptop Per Child (OLPC) project.
OLPC aimed to boost learning in poorer nations via a custom-built laptop intended to cost no more than $100.
Intel's withdrawal is a blow to OLPC which has found few nations willing to buy large numbers of laptops.
Intel joined the OLPC in July 2007 and was widely expected to work on a version of the project's laptop that used an Intel chip. Many expected this machine to be unveiled at the CES technology fair which opens in Las Vegas on 5 January.
The first versions of the OLPC or XO laptop were powered by a chip made by Intel's arch-rival AMD.
FROM THE DOT.LIFE BLOGOLPC was always going to face an uphill battle when confronted with a mighty corporation like Intel
Rory Cellan-Jones, BBC technology correspondent
Intel spokesman Chuck Molly said it had taken the decision to resign from the OLPC board and end its involvement because the organisation had asked it to stop backing rival low-cost laptops.
On the OLPC board with Intel are 11 other companies including Google and Red Hat.
The chip maker has been promoting its own cheap laptop, the Classmate, in many of the same places as the OLPC.
"OLPC had asked Intel to end our support for non-OLPC platforms, including the Classmate PC, and to focus on the OLPC platform exclusively," said Mr Mulloy . "At the end of the day, we decided we couldn't accommodate that request."
He added that the use of AMD chips in the first XO laptops had not influenced its decision.
Prior to Intel's involvement, OLPC founder Nicholas Negroponte criticised the chip firm for what he called its attempts to undermine the project's work.
He said Intel was selling its Classmate at a loss to make the XO laptop less attractive.
While Dr Negroponte's initial aim was for a laptop costing only $100, the final versions that have been trialled in Nigeria and Uruguay cost $188 (£95).
Costs were supposed to be kept low by governments ordering the XO laptop in shipments of one million, but large orders for the XO laptop have, so far, not materialised.
In a bid to boost the numbers of laptops available, OLPC ran a "Give One, Get One" programme in the US from 12 November to 31 December.
This allowed members of the public to buy two XO machines - one for themselves and one for a OLPC project elsewhere.
OLPC said the success of this had helped it to launch programmes in Haiti, Rwanda, Ethiopia, Cambodia, Mongolia, and Afghanistan.