The would-be Labour MP at the centre of allegations of trade union selection fixing has pulled out despite a party inquiry finding no evidence of wrongdoing.
Unite-backed Karie Murphy has been reinstated to the party but said she was withdrawing from the race for the Falkirk seat for the sake of "reconciliation and unity".
The dispute sparked a furious row between Ed Miliband and union leaders, with Unite firmly denying any wrongdoing.
A Labour spokesman said "key evidence" had been withdrawn from the inquiry, believed to relate to claims people were signed up as party members without their knowledge in a bid to stuff the constituency with Unite supporters.
"Karie Murphy and (constituency party chairman) Stevie Deans, who were suspended, will now be reinstated as they have not been guilty of any wrongdoing," he said.
"No organisation or individual has been found to have breached the rules as they stood at the time.
"The general secretary has determined that given these circumstances Scottish Labour should move to select its candidate for Falkirk. These steps will enable Labour in Falkirk without further delay to choose a candidate and prepare for the general election."