"Dissatisfaction is very strong among grassroots CDU members", he said. The SPD then suffered its worst result of the postwar era in September's election.
Schulz faced anger within the SPD for his willingness to take the foreign ministry job, despite vowing never to serve in a Merkel-led cabinet - it would also have been a move that would have been both unpopular in the party and left it with a significant credibility problem.
"My own personal ambitions must be placed behind the interests of the party". Should the vote fail, Germany could be headed to an unprecedented new election.
The pitch is created to appeal to his party's 464,000 members before they vote on the deal, which is the final hurdle the SPD needs to pass before the government can be formed.
A Forsa poll had shown nearly three-quarters of Germans thought it would be wrong for Schulz to become foreign minister.
"I hereby renounce joining the federal government and at the same time implore that this should be an end to debates about personalities" within the SPD, Schulz said in a statement.
Merkel's conservatives and the SPD agreed on Wednesday to form a coalition government but SPD members have the right to veto the deal.
Both Merkel's CDU party and Schulz's SPD party have expressed disquiet about the progress of coalition negotiations
Sigmar Gabriel, a popular foreign minister in the previous government and until recently seen as a close friend of Schulz, bitterly attacked his party leader in an interview on Thursday, hinting at broken promises.
Mr Schulz, facing criticism inside the party, said he did not want disagreements about his role to damage the chances of forming a new coalition.
Chancellor Angela Merkel receives Valentine's Day flowers from the Central Gardening Association at the Chancellery in Berlin, Germany, February 9, 2018.
Kevin Kühnert, leader of the SPD's youth wing, is travelling around the country urging members to say "no". He told broadcaster SWR he expected a minority government to take charge in Germany, at least for a few months, if SPD members heeded his call.
Kuehnert, 28, said the SPD and the conservative bloc had "received a shot across the bows" in September's election after governing together since 2013 and they needed to respect that clear message from voters.
Paul Ziemiak, leader of the Young Union, has pressed the CDU to consider its future after Angela Merkel leaves office. Many members thought the CDU had failed to negotiate well, he said.