The ruling Justice and Development party (AKP) is to hold a party congress within the next 15-20 days to select the party’s leadership, and Davutoğlu will not contest the election, according to CNN Turk.
The decision was taken at a meeting between Erdoğan and Davutoğlu on Wednesday.
The latter has been prime minister since 2014 after being chosen as Erdoğan’s successor in the role.
But the two men have reportedly been involved in a power struggle since June 2015 elections when the party saw a slump in support that led to a hung parliament, and another election five months later in which the AKP won a majority.
The party congress could be held as soon as May 21 and no later than June 6.
Davutoğlu has been more vocal than many expected from Erdoğan’s hand-picked successor, speaking out on issues such as relations with the EU and the detention of government critics.
European officials said they believed Davutoğlu had been pushed aside for not always following Erdoğan’s line.
Media reports about a potential shake-up of the Turkish government were viewed with concern during Wednesday’s meeting of European commissioners, according to a source present in the room. The Commission sees Davutoğlu as a partner in the EU-Turkey deal; it wouldn’t be a good sign a success of the visa liberalization proposal if he wasn’t there to ensure Turkey stands by its commitments, the source said.
The news came on the day that the European Commission recommended that the EU grant visa-free travel to Turks in exchange for assurances that Ankara would meet certain criteria, including improved security measures and civil rights protections, by the end of June. Davutoğlu was the main driver of that deal on the Turkish side.