The Al Qaeda-linked group, which Washington says was behind the 2012 Benghazi attack that killed the then US ambassador, had lost its leader, Mohammed Azahawi, in clashes with Khalifa Haftar's forces in Benghazi at the end of 2014.
Libya's Al Qaeda-linked Ansar al-Sharia militant group is formally dissolving itself, it said in a statement released online on Saturday.
The group, which Washington says was behind the 2012 Benghazi attack that killed the US ambassador Christopher Stevens, had been at war with Khalifa Haftar's eastern-based Libyan National Army.
The group said its decision came on the back of heavy losses that have wiped out its leadership and decimated its fighters, according to the statement.
Forces aligned with the Libyan National Army have skirmished since late last year with opponents aligned with a UN-backed Government of National Accord (GNA) in Tripoli.
Ansar al-Sharia is one of the militant groups that sprung up in Benghazi, Libya's second largest city, in the chaos after the intervention by Western force resulted in the death of dictator Moamer Kadhafi in 2011. They overran the city in 2014.
East Libyan military strongman Khalifa Haftar earlier this month launched an offensive to oust militants from their two remaining strongholds in Benghazi.
Groups such as Ansar al-Sharia, which had tried to maintain a stronghold in the country's east, have inserted themselves into the larger war, creating a fractious battleground overlaid by a multitude of militias.
The group's statement called on revolutionary forces and religious councils in Benghazi to unite in order to form a united front.