The decision, made by the party's Penang leadership, was in contrast to an earlier announcement by PRM secretary-general Koh Swe Yong who had stated an interest to contest in the by-election.
However, Penang PRM decided not to field a candidate following a committee meeting last weekend as it was not prepared to burn its bridges with Pakatan Rakyat.
Explaining this, PRM vice-president V Gary Nair said the committee's 'no contest' decision was based on several reasons.
He said PRM should not be contesting against Pakatan in Penanti after pledging political and moral support for the coalition over past 15 months.
He pointed out that Anwar even kick-started his electoral campaign in Penang at last year's general election with his first rally at PRM headquarters in Gelugor.
PRM leaders have also campaigned for Pakatan candidates during the general election and the subsequent by-elections in Permatang Pauh, Bukit Selambau and Bukit Gantang.
"We can't become a hypocrite and make a somersault in our political stance," said Gary Nair, who doubles up his role as the PRM Penang chief.
Penanti state seat became vacant when incumbent representative, former deputy chief minister 1 Mohammad Fairus Khairuddin resigned on April 16.
PKR has announced that it would field PKR state deputy chief and former academician Mansor as Pakatan candidate, while former PKR state women leader Aminah Abdullah has indicated her desire to contest the seat as an independent candidate.
Meanwhile, Islamic-based Angkatan Keadilan Insan Malaysia (Akim) has also indicated its interest to contest.
PKR's arch-rival Umno will decide on May 18 on whether it would field a candidate under the Barisan Nasional ticket.
Polling is on Sunday, May 31, and nomination is on Saturday, May 23.
Disappointed with ex-leaders
PRM has always been a political opponent to the ruling BN coalition in Putrajaya and its predecessor, the Alliance, since its formation in the 1950s.
The tiny party, which is easily recognisable with its wild buffalo mascot, as well as the Labour Party were political powerhouses under the Socialist Front banner in Penang in the 50s and 60s.
But since the Front boycotted the 1969 general election, it was downhill for both PRM and the Labour Party, which went into oblivion soon after.
The last time PRM picked up a seat was in 1978 general election when then president Kassim Ahmad won the Balik Pulau parliamentary constituency in Penang.
"Being a BN rival ever since we were born, we cannot be challenging Pakatan," said Gary Nair.
He also expressed confidence that the imminent High Court verdict in Kuala Lumpur on May 26 on the former PRM leaders' suit against Registrar of Societies would favour PRM.
He said that a favourable decision by the court would allow the party to become a Pakatan coalition partner and field candidates across the country in the 13th general election.
The suit is to urge the ROS to deregister PRM following the party's merger with PKR in 2001.
However, those party members who were against the merger had decided to stay with PRM and are against the deregistration.
In 2001, some 60 percent of PRM's estimated 10,000 members voted at the party annual congress in favour of a merger with Parti Keadilan Nasional, PKR's predecessor.
The congress then held an extraordinary congress in the same year to rubber stamp the formal dissolution of PRM and solemnise its merger with Keadilan into a new entity - the PKR.
However, according to Gary Nair, the extraordinary congress never took place, which allowed PRM to exist legally until now, with some 4,000 members nationwide.
He is furious over the venomous campaign carried out by former PRM leaders now in PKR to discredit PRM.
"We have no qualms against those who have joined other parties such as PKR and Parti Sosialis Malaysia (PSM).
"But we cannot comprehend the reasons behind their overzealous drive to undermine and destroy us," said a furious Gary Nair. - Malaysiakini, 14/5/2009, PRM stays out of Penanti