Etihad's Swiss leisure flights operator, Etihad Regional, is being sold to Slovenia's Adria Airlines.
Etihad had acquired 33% of Darwin Airlines in 2014 after which the airline began flying its flights to Western European destinations under the brand name Etihad Regional.
The venture was one of former CEO James Hogan's strategic investment in carriers across Europe which the Abu-Dhabi based carrier had hoped would yield results.
However, stiff competition from Swiss International Air led to it cancelling two thirds of its flights in 2015 as performance continued to lag.
The move away from Darwin adds to Etihad's new direction away from equity stakes in Europe.
Kevin Knight, Etihad Aviation Group’s Chief Strategy and Planning Officer, said: “The decision to sell this minority stake in Darwin is a result of the on-going strategic review of our investments and a decision to concentrate on our other partnerships. We wish everyone at Darwin well in the future.”