The institution said it had grown “increasingly dissatisfied with a lack of attention to good governance, due process and administration” since the talks started earlier this year.
The merger would have seen Uwic, along with University of Wales Trinity Saint David and Swansea Metropolitan University, come together into the University of Wales to make the third largest institution in the country.
In a statement, Uwic says it “is no longer a participant in the merger discussions to establish a new University of Wales.
“Since the inception of merger discussions Uwic has become increasingly dissatisfied with a lack of attention to good governance, due process and administration.
“Uwic regrets this outcome because hitherto it has been unrelentingly supportive of the University of Wales, shown by the considerable resource it invested to achieve the positive outcomes for the University of Wales in its recent [Quality Assurance Agency] institutional review.”
It adds that it remains a financially viable institution that is attractive to students.
In December, Trinity Saint David and Swansea Metropolitan agreed in principle to merge, and in February Uwic was reported to be joining the discussions.
In a statement, the University of Wales says that it is still discussing “the options available for a merger with other universities”.
Trinity Saint David and Swansea Metropolitan have not yet commented on how Uwic’s decision affects their merger.
The Higher Education Funding Council for Wales said that last December that the number of Welsh universities should be cut from 10 to six in the next two years, and that none should have an income below the UK median average.
Pressure to merge has also come from Leighton Andrews, the education minister for Wales, who warned that future funding could depend on institutions’ willingness to merge. Mr Andrews said in December that Welsh universities had to “adapt or die”.
Commenting on Uwic's withdrawal from talks, a spokeswoman for the Welsh government said: “This is a matter for the institutions involved. As [Mr Andrews] has said on many occasions our interest is in tackling some of the issues which persist at the University of Wales, especially around international degree awarding, to ensure the long term sustainability and success of the institution.”