The project, run by the Jerusalem city council, has stoked controversy over the Israeli cable car's planned route which passes through parts of mostly Arab East Jerusalem.
"To avoid any political interpretation, Suez Environment has decided not to take part in this project," it said.
Suez said its involvement in the project was limited to a feasibility study carried out by the consultancy firm SAFEGE, one of its subsidiaries.
"SAFEGE fulfilled a contract for Jerusalem municipality between June and November 2013, carrying out a feasibility study, from a technical perspective, on a public cable car system in Jerusalem," it said.
The Palestinians oppose any Israeli construction in the eastern sector, captured in the 1967 Six-Day War, that they want as the capital of their future state.