Former Rangers chief executive Martin Bain has dropped his legal action against the club, lawyers said on Thursday.
Mr Bain was pursuing the Glasgow club for almost £900,000 in damages, alleging a breach of contract following its takeover by businessman Craig Whyte.
The case at Scotland's highest civil court, the Court of Session in Edinburgh, was due to be heard in full in August.
Last year a judge told the club, which entered administration in February, to set aside almost £500,000 in the event that Mr Bain won his case.
On Thursday Mr Bain issued a statement via legal firm Levy & McRae in which he stated that he would discontinue the legal action.
He also said he will return the money frozen as part of his case, minus legal expenses, to the administrators "in an effort to help the club''.
He further criticised the "shocking'' damage he said has been "inflicted'' on the club.