Defense Minister Grete Faremo said she expects understanding from NATO allies because Norway has a small air force and cannot "maintain a large fighter jet contribution during a long time."
The announcement comes as the Obama administration puts pressure on Germany, Poland, Spain, Turkey and the Netherlands to shoulder a greater share of the alliance campaign, which has heated up with intensified airstrikes on Libya's capital.
The Scandinavian country's air force says Norwegian F-16 jets have carried out about 10 percent of the NATO airstrikes in Libya since March 31.
A NATO spokeswoman said the bloc appreciates Norway's contribution to the operation.
"We also note the fact that there are still several weeks to go, that they will continue contributing for quite some time yet, which we also appreciate," Oana Lungescu told The Associated Press.
The alliance decided last weekend to extend the Libyan mission for 90 days, into late September. But it's unclear how fast the intervention will be able to end. The Libyan opposition holds about one-third of the inhabitable area of the country, but has struggled to make advances against Moammar Gadhafi's forces.
The parties in Norway's center-left coalition government had been at odds over whether to extend the country's participation, which was scheduled to expire June 24. The most leftist faction in the government, the Socialist Left Party, opposed an extension but a compromise was reached to stay in the operation until Aug. 1 with fewer planes.
"It is wise to end the Norwegian fighter jet contribution. Now Norway should apply its efforts to find a peaceful solution in Libya," Socialist Left Party lawmaker Baard Vegar Solhjell said.
Associated Press writer Raf Casert in Brussels contributed to this report.