Shaunna Thomas, co-founder of the women's rights group UltraViolet, welcomed Summers' withdrawal, saying she hopes it serves as "a reminder to all that sexism has no place anywhere in society and certainly not in the highest levels of our government."
Thomas called on Obama to nominate Yellen, 67, who has been closely aligned with Bernanke and has helped devise the Fed's low-interest rates policies.
Since joining the Fed's board as vice chair in 2010, Yellen has supported Bernanke's use of not only the Fed's traditional tool of short-term interest rates but also non-traditional tools designed to help the economy. These include bond purchases and guidance to investors about the likely direction of rates.
As early as this week, the Fed is expected to scale back its $85 billion-a-month in Treasury and mortgage bond purchases. Those purchases have been designed to keep long-term loan rates low to get people to borrow and spend and invest in the stock market.
The low rates are credited with helping fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth of many Americans.
Yellen has long been considered a top candidate for the chairmanship in part because of her expertise as an economist, her background as a top bank regulator and her experience as vice chair.
Last week, more than 350 economists signed a letter to Obama calling on him to nominate Yellen. The letter was designed to draw attention back to Yellen amid signs that Obama was leaning toward Summers.
The letter, whose signers include economists with ties to Obama, credited Yellen for prescience in warning in 2005 about the impending mortgage meltdown, for her consensus style of leadership and for her commitment to job growth.
Liberal critics of Summers had focused in particular on the role he played in deregulating parts of the financial industry during the Clinton administration.
More than 20 Democratic senators this summer signed a letter to Obama expressing support for Yellen. The letter was circulated by Sen. Sherrod Brown of Ohio, a member of the Banking Committee.
Last week, another committee Democrat, Jon Tester of Montana, announced he would oppose Summers. Aides to Brown and to Sen. Jeff Merkley of Oregon, also on the committee, indicated that their bosses intended to oppose Summers, too.
That meant Summers would have to win support from Republicans on the committee, a tough challenge.
Still, a Yellen nomination would likely face resistance from many Republicans. Critics argue that the Fed's low-rate policies have raised the risk of high inflation and dangerous bubbles in assets like real estate and stocks. Yellen is seen as a leading architect of those policies.
Obama had vigorously defended Summers in recent weeks, both in public comments and in closed-door meetings with lawmakers.
"I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future," Obama said Sunday.
Associated Press writer Jim Kuhnhenn contributed to this report.
Outpatient ROBOTIC HYSTERECTOMY. Trust an experienced Robotic Surgeon.