Major powers have long been at odds about how to end the increasingly brutal battle for Syria, and the withdrawal of the observers follows the collapse of a peace plan drawn up by outgoing peace envoy Kofi Annan.
On the ground, activists reported that Syrian forces shelled a group of people queuing outside a bakery in the eastern Qadi Askar district of Aleppo, the city at the epicentre of the battle between the regime and armed rebels.
The Syrian Observatory for Human Rights said 10 people were killed in the district, and that at least 99 had died in violence across the country on Thursday, most of them civilians.
On Wednesday, around 40 people, including women and children, were killed in a massive air strike on civilians in the rebel bastion of Aazaz, just north of Aleppo, according to rights groups and residents.
Human Rights Watch urged the UN Security Council to impose an arms embargo on Syria after the air strike on Aazaz. "Yet again, Syrian government forces attacked with callous disregard for civilian life," it said.
Mohammed Nur, director of the now closed Aazaz media centre, said 40 people were killed -- including 30 from one extended family -- and 150 wounded but that bodies were still being returned from nearby Turkey where many of the victims had fled to.
"Bashar al-Assad doesn't care where the bombs land and in any case, his pilots are not that accurate," he said.
With the violence showing no signs of abating, Russia, which -- along with China -- has blocked three UN resolutions on the crisis, called for world powers to make a joint appeal for the regime and rebels to end the fighting.
Chinese Foreign Minister Yang Jiechi also urged a visiting Syrian envoy to implement a ceasefire and accept international mediation.
But French Foreign Minister Laurent Fabius renewed calls for Assad to go.
"France's position is clear: we consider Assad to be butchering his own people. He must leave, and the sooner he goes the better," Fabius said at a refugee camp for Syrians in Jordan, before flying on to Lebanon.
Earlier Thursday, the Organisation for Islamic Cooperation suspended Syria, with its chief Ekmeleddin Ihsanoglu saying: "This (Muslim) world can no longer accept a regime that massacres its people using planes, tanks and heavy artillery."
The United States and the opposition Syrian National Council welcomed the move, but it was rejected by Syria's staunch ally Iran and by Damascus, which charged it was the victim of a US-masterminded "conspiracy".
-- One million risking 'destitution' --
Assad, whose regime has been hit by a spate of high-level defections and a bomb attack that killed his top security chiefs, insists he is fighting a "terrorist" plot aided by rival Sunni Muslim powers including Saudi Arabia.
UN humanitarian chief Valerie Amos, who visited Damascus to push for greater aid access, warned that the situation was worsening, with the number of people in need possibly as high as 2.5 million and one million at risk of "destitution".
Syrian Foreign Minster Walid Muallem, for his part, accused Arab states of failing to give even one dollar to help the humanitarian situation in his country, sending in arms for the rebels instead.
On Wednesday, a damning report by the UN Commission of Inquiry issued Wednesday said government forces and their militia allies committed crimes against humanity including murder and torture and other "gross violations of international law."
It said they were responsible for the massacre in the central city of Houla in May when 108 civilians, including 49 children, were killed in a grisly attack that Assad himself had said was the work of "monsters".
Rebel fighters were however not spared in the probe, which found them guilty of war crimes, including murder, extrajudicial execution and torture.
The conflict erupted in March 2011 when regime forces cracked down on peaceful protests but has spiralled into an armed rebellion that the Observatory says has killed 23,000 while the UN puts the toll at 17,000.
Stoking fears that the warring could spread, dozens of Syrians were kidnapped in Lebanon on Wednesday -- many by an armed Shiite Muslim clan -- in retaliation for events across the border.
"This brings us back to the days of the painful war, a page that Lebanese citizens have been trying to turn," Prime Minister Najib Mikati said, recalling the dark days of the civil war and the kidnapping of Western hostages.
Saudi Arabia -- the regional Sunni powerhouse that is opposed to Assad's Alawite-led regime -- along with at least two other energy-rich Gulf states ordered their nationals to leave immediately because of threats.
Lebanon has in the past had to confront cross-border shootings, shelling by the Syrian army, tit-for-tat kidnappings and sectarian clashes as the violence in Syria escalates.