Mr Phillips, co-chair of the Democratic Policy and Communications Committee, said his "convictions" were no longer in line with the rest of his caucus and felt the need to cede his leadership role, Axios reported.
“My convictions relative to the 2024 presidential race are incongruent with the majority of my caucus, and I felt it appropriate to step aside from elected leadership,” he told the outlet in a statement.
He said he would "continue to abide by my convictions, place people over politics, and support our shared mission to deliver security, opportunity, and prosperity for all Americans."
Mr Phillips began toying with the idea of a primary challenge against Mr Biden in July, and has not wavered from the idea since.
He named Mr Biden's age as one of his chief concerns, pointing to polls that show Democratic voters don't want the incumbent to represent them in the 2024 presidential race.
“First of all, my call is for the president to pass the torch. I think that would be in the country’s best interests, and certainly Democrats. We have an extraordinary bench of Democrats ready to go, prepared, proximate, well-positioned, but we will never know that,” he told PBS.
He said the decision was not about him or his own presidential run, but said he was afraid that the party might be repeating the mistakes it made that led to Donald Trump’s election in 2016.
“It is about me trying to elevate a conversation that right now is surprising that nobody wants to have. And I do not want to repeat of 2016, when we essentially anointed someone, it was her turn,” he said. “And, lo and behold, look what happened. I think we’re sleepwalking into the very same mistake again. And the time to have the conversation ... is right now.”
However, the lawmaker from Minneapolis admitted that he is not "well positioned" to take on Mr Biden, and has called on other Democrats with more significant national name recognition to jump in and challenge the president.
He previously floated a “dream team” of Michigan Governor Gretchen Whitmer and Senator Raphael Warnock of Georgia to challenge Mr Biden in 2024, according to Vanity Fair.
Mr Phillips stepping down after floating a challenge to Mr Biden may be a sign that Democrats are circling the wagons around the incumbent ahead of the 2024 presidential election, even as concerns over his age continue to plague the party.
The congressman's critiques of Mr Biden reportedly caused some internal conflicts within the caucus.
Congresswoman Sydney Kamlager-Dove of California reportedly alluded to Mr Phillips last week during a closed-door caucus meeting.
“There is someone in leadership who is not on message about our president,” she reportedly said, leading to a round of applause from her colleagues, according to a House Democrat present at the meeting who spoke with Axios.
House Minority Leader Hakeem Jeffries told the caucus they needed to stay on message as the government teetered on the edge of a shutdown.
Congressman Jake Auchincloss of Massachusetts is reportedly considering running to replace Mr Phillips as co-chair of the DPCC, according to a source familiar with the matter who spoke to Axios.