The Marmite maker rejected the US food giant's bid on Friday, saying it saw "no merit, either financial or strategic" in Kraft's offer, worth about $143bn (£115bn).
"Unilever and Kraft Heinz hold each other in high regard," the companies said in a joint statement.
Shares in Unilever, which closed 13% higher on Friday, fell 7.3% in lunchtime trading in London to £35.18.
Kraft's offer had been at an 18% premium to Unilever's closing share price on Thursday. Kraft shares rose 11% on Wall Street on Friday.
George Salmon, a Hargreaves Lansdown analyst, said shelving the deal just one business day after it was announced came as a surprise.
"It was always going to be a difficult pitch to convince shareholders to relinquish their grip on Unilever, given the expectations for the company to keep churning out resilient growth in the years to come," he said.
The deal would have been one of the biggest in corporate history, combining dozens of household names.
Unilever owns Ben & Jerry's ice cream, Dove soap, and Hellmann's mayonnaise, while Kraft's range includes Philadelphia cheese and Heinz baked beans.
"It would appear that Kraft Heinz have underestimated both the intrinsic value of Unilever and the challenge of acquiring control of a Dutch company whose stakeholders would have opposed such a move vociferously," said Martin Deboo, a Jefferies International analyst.
More than half of the company's shares are in the Dutch-listed entity.
Michael Mullen, a Kraft Heinz spokesman, said its interest was made public at an extremely early stage.
"Our intention was to proceed on a friendly basis, but it was made clear Unilever did not wish to pursue a transaction. It is best to step away early so both companies can focus on their own independent plans to generate value," he said.