Mr Barilaro on Thursday said he would withdraw from the role as the state's Senior Trade and Investment Commissioner to the Americas, saying media attention made his involvement unviable.
"It is clear that my taking up this role is now not tenable with the amount of media attention this appointment has gained," Mr Barilaro said.
"I believe my appointment will continue to be a distraction and not allow this important role to achieve what it was designed to do, and thus my decision.
"I stress, that I have always maintained that I followed the process and look forward to the results of the review."
CEO of Investment NSW, Amy Brown, said she had been notified Mr Barilaro would pull out of the $500,000 a year role.
"This evening Mr John Barilaro notified me that he is withdrawing from the role of Senior Trade and Investment Commissioner Americas, effective immediately," Ms Brown said in a statement on Thursday.
"I request that his privacy be respected at this time."
Investment NSW would continue to assist with two inquiries probing the appointment, she said.
"As such it is not appropriate to make any further comment."
NSW Labor leader Chris Minns criticised Premier Dominic Perrottet for failing to move against Mr Barilaro.
"It's telling that the premier didn't sack John Barilaro, he walked," Mr Minns said in a statement.
"Mr Barilaro should never have been appointed to this job in the first place.
"Serious concerns remain about how he got the job and the parliamentary inquiry will continue to pursue those."
Earlier on Thursday Police Minister David Elliott called on the former Nationals leader to withdraw from the position.
"My very, very strong view is that he shouldn't be going to New York and I'm pretty sure that that's the view of the majority of people in this state," Mr Elliott told Sky News.
Investment and Trade Minister Stuart Ayres said he had concerns after Mr Barilaro texted him about the plum job in December.
"He contacted me via text message ... indicating that he was interested in it," Mr Ayres told reporters on Thursday.
"I informed him that they would be publicly advertised and he, like any other private citizen, will be able to apply."
He admitted he had always held the view Mr Barilaro's appointment would be politically contentious, but said he did not have the authority to direct his former colleague to resign.
The government announced two weeks ago Mr Barilaro had been appointed to the role, a job he created while trade minister.
The job came with a $487,000 salary plus a $16,000 allowance, with Mr Barilaro due to start work in the Manhattan office on July 12.
Nearly $1 million has been spent refurbishing part of the Australian consulate in New York for Mr Barilaro to occupy.
A parliamentary inquiry on Wednesday heard senior Investment NSW bureaucrat Jenny West was told last year she had the job.
Ms Brown told the inquiry she had to withdraw the verbal offer to Ms West in October. That came after a request was made by Mr Barilaro's office in September to move the trade commissioner positions from an in-house decision for her department to one requiring cabinet approval.
Days later Mr Barilaro announced his retirement as an MP, and officially ended his time in parliament in December.
Mr Barilaro was offered the job in May and signed the contract earlier this month.
The parliamentary inquiry will resume on Wednesday when Ms West will appear as a witness.
Mr Perrottet has also announced a separate review into the recruitment process, which he expects within weeks.
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