"Our great Republican Congressman John Ratcliffe is being treated very unfairly by the LameStream Media," Trump said in a series of tweets on Friday.
"Rather than going through months of slander and libel, I explained to John how miserable it would be for him and his family to deal with these people. John has therefore decided to stay in Congress where he has done such an outstanding job representing the people of Texas, and our Country.
"I will be announcing my nomination for DNI shortly," he added.
Shortly after Trump's announcement, Ratcliffe tweeted that he was withdrawing from consideration, reports Xinhua news agency.
"While I am and will remain very grateful to the President for his intention to nominate me as Director of National Intelligence, I am withdrawing from consideration," the lawmaker from Texas said.
"I do not wish for a national security and intelligence debate surrounding my confirmation, however untrue, to become a purely political and partisan issue. The country we all love deserves that it be treated as an American issue. Accordingly, I have asked the President to nominate someone other than me for this position."
Trump picked Ratcliffe as his nominee on July 28, four days after Robert Mueller testified before the House Judiciary Committee, when the 53-year-old Republican fiercely questioned the former Special Counsel over his two-year investigation into the alleged Russian interference in the 2016 US presidential election, and Trump's possible obstruction of justice.
The nomination, which needs to be approved by the Senate, immediately evoked bipartisan questions about Ratcliffe's qualifications and over whether he had exaggerated his resume amid further intense scrutiny.
The President's selection generated scant enthusiasm among senators of both parties, according to local media reports.
Ratcliffe, a frequent Trump's defender, has been viewed as one of the most conservative members of Congress based on his voting record. He has served the House since 2015.
Coats, who was scheduled to leave office on August 15, was sworn in as the fifth DNI in March 2017. He frequently appeared out of step with Trump over policy and intelligence issues, including the alleged Russian interference.
The DNI serves as the principal intelligence adviser to the White House, and heads the US Intelligence Community, a federation of 17 federal intelligence agencies from the civilian and military sectors.
The role was created in the wake of the terrorist attacks on September 11, 2001 in order to prevent further intelligence failures.
( With inputs from IANS )