The deputy Prime Minister said it risked "undermining public confidence" to let illegal immigrants stay if they have been in the country for more than 10 years.
In his first major speech on immigration, he abandoned the controversial proposal, which was championed by the Liberal Democrats at the last election.
Mr Clegg previously supported the idea of "earned citizenship" for illegal immigrants. His 2010 general election manifesto stated the Liberal Democrats would allow an amnesty for those who had been in the country a decade, speak English and have a clean record.
"Rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add 'within the limits of the law' because law is often but the tyrant's will, and always so when it violates the rights of the individual." Thomas Jefferson