The political movement the U.S. has backed in Venezuela to challenge the country’s authoritarian government is on the verge of breaking up after a major faction announced its withdrawal on Sunday.

Julio Borges, a leading figure in the antiregime coalition, called for an end to the leadership of Juan Guaidó, whom the U.S. and dozens of allies have backed as Venezuela’s legitimate president since January 2019 in a strategy to remove strongman President Nicolás Maduro. Until now, Mr. Guaidó has been leader of a movement that...

The political movement the U.S. has backed in Venezuela to challenge the country’s authoritarian government is on the verge of breaking up after a major faction announced its withdrawal on Sunday.

Julio Borges, a leading figure in the antiregime coalition, called for an end to the leadership of Juan Guaidó, whom the U.S. and dozens of allies have backed as Venezuela’s legitimate president since January 2019 in a strategy to remove strongman President Nicolás Maduro. Until now, Mr. Guaidó has been leader of a movement that calls itself an interim government, complete with a bureaucracy and diplomats.

“The notion of the interim government has to disappear,” said Mr. Borges in a virtual news conference from his exile in Bogotá, Colombia, adding that he is resigning as Mr. Guaidó’s chief foreign diplomat. “We can’t continue with this bureaucracy.”

There was no immediate comment from spokesmen for Mr. Guaidó or from James Story, the Colombia-based U.S. ambassador to Venezuela. 

Mr. Borges said the so-called interim government led by Mr. Guaidó has lost legitimacy with average Venezuelans, an assertion backed by polling. He said it is mired in allegations of having mishandled billions of dollars in Venezuelan state assets in the U.S. and Colombia that came under the control of Mr. Guaidó’s aides after foreign governments deemed Mr. Maduro’s rule illegitimate.

A new opposition movement needs to be formed with a clearer strategy over how to restore democracy, Mr. Borges said.

“We can’t be an interim government that wants to perpetually stay in power and is turning into part of the problem, rather than the solution,” Mr. Borges said.

The withdrawal of Mr. Borges and his party, Justice First, is a blow to the opposition coalition and raises questions over whether the Biden administration will continue to back Mr. Guaidó after his term ends Jan. 5, which U.S. policy makers had previously said wouldn’t mean a cutoff in support, said Geoff Ramsey, who tracks Venezuela at the policy research group, the Washington Office on Latin America.

“This is a reckoning moment for the opposition,” said Mr. Ramsey. “We are seeing an acceptance in the opposition that they need to go back to the drawing board and connect with the population. They need to go back to being a social movement rather than an international bureaucracy.”

Despite street protests, efforts to spark senior military officers to mutiny and U.S. sanctions on Venezuela’s oil industry, the Guaidó-led movement failed to remove Mr. Maduro, whose regime clung to power with support from Russia and China.

Meanwhile, unfulfilled promises crushed Mr. Guaidó’s approval rating to about 15%, statistically tied with Mr. Maduro in an October poll by Datanalisis. Last month, the regime won a majority of local and state elections that for the first time in four years included the participation of most of the opposition.

The breakup was announced days after Brian A. Nichols, the U.S. State Department’s assistant secretary for Western Hemisphere Affairs, spoke with Mr. Guaidó and reiterated Washington’s commitment to his movement. “We support the interim government’s important work to forge a path to democracy and end Venezuela’s humanitarian crisis,” Mr. Nichols wrote in a Twitter post.

While Venezuela’s fractious opposition has long differed over strategies to challenge Mr. Maduro, political parties had largely stuck together since the U.S. backed their plan to name Mr. Guaidó as interim president nearly three years ago.

But a major breaking point has been the opposition’s management of more than $10 billion in Venezuelan state assets that the interim government was supposed to safeguard from Mr. Maduro, as well as from foreign creditors seeking to take over assets as compensation for billions of dollars owed by the bankrupt regime in Caracas.

Opposition leaders Juan Guaidó and Freddy Superlano greeted supporters this month.

Photo: Ariana Cubillos/Associated Press

The assets include the U.S.-based oil refiner Citgo Petroleum Corp. sitting at the Bank of England. Financial troubles at another Venezuelan state-owned firm, a Colombia-based fertilizer plant called Monómeros Colombo Venezolanos SA, has also led to opposition infighting, said people familiar with the situation at that company.

In October, a panel of opposition lawmakers alleged in a report that the company’s directors—some of them from Mr. Guaidó’s party—had sought to loot the company for personal gain. Mr. Guaidó denied he had any ties to the directors and called for a wholesale restructuring of Monómeros. Macario Gonzalez, who leads an audit commission under Mr. Guaidó that is investigating allegations of wrongdoing at the company, called the report incomplete and part of an effort to smear the interim government.

Mr. Guaidó and his aides have said that the U.S. should continue to recognize the interim government into next year because otherwise Mr. Maduro might regain control over the foreign assets.

Mr. Borges disagreed. “The fact that the opposition is spending its time discussing the handling of the assets instead of how to get rid of Maduro is a shame,” he said. “We can’t continue like this.”

Mr. Borges has proposed removing political operatives from managing the foreign assets, with an independent trust undertaking the role. First Justice has also played a leading role in moving Venezuela’s opposition away from confronting Mr. Maduro to negotiating concessions to ensure free and fair presidential elections in 2024. 

The Biden administration has said that if the regime makes far-reaching, irreversible concessions that help lead to the restoration of democracy, then Washington would lift financial and oil-sector sanctions that have choked off Venezuela’s economy.

Write to Kejal Vyas at kejal.vyas@wsj.com