Haiti's government-backed candidate, Jude Celestin, has pulled out of the election race after a nearly two-month power struggle.
The co-ordinator of the ruling Unity party confirmed the move on Wednesday. That opens the door for a second-round runoff between former first lady Mirlande Manigat and popular singer Michel Martelly.
No date has been set for the vote.
The international community had been negotiating with other powerful members of the government's Unity party in an effort to get Celestin off the second ballot.
Experts called in by Preval following the November election found that Celestin came in second because of widespread vote rigging and fraud. They called for Celestin to be dumped from the run-off but Preval, who backed Celestin, refused.
Following the results, pro-Martelly rioters shut down much of the country. Five people died in the violence. Members of the international community also criticized the results.
The Organization of American States has recommended Celestin drop out and that Martelly should have finished second in the vote. Its recommendation, based on a sample of the vote, was made over the objections of other candidates and observers who said the entire vote should be thrown out.
'Relieve a lot of pressure'
Based on a review of about 17 per cent of the vote, OAS election observers said that Celestin and Martelly, separated by a few hundred ballots in the preliminary results, should switch places.
Canada's ambassador to Haiti, Henri-Paul Normandin, said that word Celestin may pull out is welcome news.
"Well it would facilitate the way forward. If he decides to announce this in the course of this week, before the final results of the first round are announced, I think that yes that will relieve a lot of the pressure."
Normandin said ending the electoral impasse is key for Haiti's security, stability and reconstruction.
"So I think that bringing the electoral process to a conclusion should be our collective priority at this time," he said.
A second round of voting, which was supposed to take place Jan. 16, could take place in late March.