Wilson Security's decision follows the announcement by the service provider, Broadspectrum, earlier this year that it, too, would abandon the asylum seeker processing centres.
The announcement leaves the Australian government without a service provider or security firm for its controversial offshore detention regime.
Matthew Phillips is the human rights campaign director at GetUp, an NGO which, for the past year, has been trying to rally communities to not do business with companies involved in offshore detention.
He said the announcement was significant because it made clear that businesses no longer wanted to be associated with the detention centres.
"Wilson have effectively washed their hands of the government's failed policy on Manus Island and Nauru," said Mr Phillips. "What that means is that they're potentially foregoing a very large amount of revenue because they realise that their reputation can't withstand such exposure to complicity with abuse."
Matthew Phillips said Wilson Security should still be scrutinised for the allegations of abuse against its guards, ideally in court.