Ms Keegan launched her bid on Monday, announcing she would stand as a candidate in Dublin Fingal East, later changing to Dublin Bay North.
She said the tragedy, which claimed the lives of 48 young people, would be her main campaign issue, also pledging to improve housing and hospitals.
However, in a statement today, Ms Keegan withdrew from the race, admitting an “error of judgement”, saying: “I cannot put my name to a party whose views do not align with my own.”
In a statement, she said: “In recent days I announced my intention to run in the upcoming general election. I did so with an exclusive focus on being a voice for those who need it most.
“For four decades, alongside my late mother, I have campaigned for justice for my sisters who died in the Stardust fire. Our campaign has always been one predicted upon human rights and equality.
“In recent days, I was approached by the National Party who wished to support me in my nomination to run for election. I accepted this proposal and agreed to be their candidate.
“In hindsight, and upon reflection, this was an error of judgment. Having accepted this proposal, I had failed to consider our competing interests on the most basic of issues.”
She added: “With the benefit of advice from my dear friend Darragh Mackin, I have realised that in hindsight, the principles I have long prided myself in are incompatible with the political party to which I had been nominated.
“I pride myself in being a daughter, sister, mother and grandmother who fearlessly speaks truth to power in seeking equality for the most vulnerable in society. I cannot put my name to a party whose views do not align with my own.
“In the same vein that I have held others to account, I hold myself to account in acknowledging where I have made a mistake. For years, I have engaged with all political parties from all walks of life. I judged people on their actions and not on their slogans.
“Through this mistake, I have learned a valuable lesson that my time is best spent supporting those who have supported me and the other Stardust families over the years, as opposed to running myself.
“I apologise for my mistake and call upon all of my community who kindly supported me regardless of politics, to accept my withdrawal of running in the general election.
“I realise now that I wouldn’t have been able to be part of any political party, as at this time, my energy remains focused on outstanding issues in relation to the Stardust, and one of them is finishing my book which is almost completed.”
Ms Keegan lost her sisters Mary, 19, and Martina, 16, in the Valentine’s Day tragedy in 1981 at the popular Stardust nightclub.
Ms Keegan and her late parents have been to the fore of the more than 40-year campaign for justice for the victims, the injured and their families.
Darragh Mackin, who Ms Keegan said she sought advice from in recent days, is the solicitor from the Phoenix Law company that represented many of the families in the recent inquests into the deaths of the Stardust disaster
In April, an inquest concluded that the 48 victims who died in the fire had been unlawfully killed, after which Taoiseach Simon Harris delivered a State apology to the families in the Dáil.
