David Mackintosh, Conservative MP for Northampton South, announced his decision ahead of a local party meeting where his candidacy was expected to be opposed.
The BBC reported millions of pounds of public money loaned to Northampton Town FC appeared to have vanished.
The MP has denied any wrongdoing.
Mr Mackintosh was criticised over the loan to Northampton Town Football Club from the borough council - when he was leader - to rebuild Sixfields stadium and develop nearby land.
About £10.25m of that money is now missing and the loan is subject to a police investigation into "alleged financial irregularities".
The football stand remains half built.
When contacted by the BBC last week, a majority of his party's local executive council said they would vote to deselect him.
Mr Mackintosh had previously said he intended to stand for re-election.
But in a statement, he said: "It has been a huge honour to be the member of Parliament since 2015, but I now feel it is the right time for my constituents to have a new representative."

And in 2015 and 2016, her Todai robot outperformed 80% of high-school pupils and was in the top 1% for maths.
But Prof Arai, a mathematician at the National Institute of Informatics, is not happy about how well it is doing.
At the Ted (Technology, Entertainment and Design) conference, in a session called Our Robotic Overlords, she said the results were "alarming".
"You might think I was delighted, but I was alarmed," she said.
"This robot, which could not read or understand, was able to outperform thousands of high-school children."
This led Prof Arai to investigate the reading and writing skills of high-school students, in conjunction with Japan's ministry of education.
"Most of the students pack in knowledge without understanding, and that is just memorising," she said.
"AIs can do that better, so we need a new type of education."
Stuart Russell, a professor of computer science at Berkeley, University of California, told the session machines would soon be reading and understanding very well.
"And very soon afterwards, they will have read everything that has ever been written," he said.
Humans needed to start devising rules for how robots related to them, he told the Ted audience, and proposed three basic principles:
But Prof Russell acknowledged there might be teething troubles.
"If a robot's job is to feed hungry kids and it sees the family cat but doesn't see that the sentimental value of the pet is greater than its nutritional value, that could single-handedly destroy the market for home robots," he said.
The idea of altruistic robots is one that Tom Gruber, the man who designed Apple's voice assistant Siri, believes in.
And while some experts, including tech tycoon Elon Musk and Prof Stephen Hawking, worry machines will overtake and destroy mankind, he maintains an optimistic vision of "humanistic" AI.
"The purpose of AI is to empower and augment us," he told the Ted audience.
"Imagine if AI remembered every person you ever met or could retrieve everything you had ever read or seen.
"Not only would it make us better at remembering people at social occasions - but for those with dementia or Alzheimer's, it would mean the difference between a life of isolation and one of dignity."

The 59-year-old was the first American to manage a Premier League club, but lasted just 85 days before being sacked by the Swans in December 2016.
They won just two of the former USA and Egypt manager's 11 games in charge.
Los Angeles, who are led by an ownership group of 27 people including Hollywood actor Will Ferrell, will join the MLS for the 2017-18 season.
The team, also co-owned by basketball legend Magic Johnson and former Cardiff City chairman Vincent Tan, will play at the purpose built 22,000-seater Banc of California Stadium.
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An MP facing deselection after being criticised over his role in a loan to a football club will not stand for re-election.
[NEXT_CONCEPT]
Prof Noriko Arai has spent years training a robot to pass prestigious University of Tokyo's entrance exams.
[NEXT_CONCEPT]
Former Swansea City boss Bob Bradley has been named as the first manager of MLS team Los Angeles FC.