Mr Little said Labour was still a socially progressive party under his leadership.
"It's not about avoiding controversy but it's about choosing the controversies that are best for us at this point in time. That stuff on euthanasia, it isn't the time for us to be talking about that."
Mr Lees-Galloway did not return calls yesterday, but has previously said euthanasia was an individual matter, not a party matter, and it would not distract from Labour's focus on bigger issues.
The Palmerston North MP took over the bill from former Labour MP Maryan Street when she was not re-elected in September. Ms Street removed the bill from the ballot in October 2013 out of concern it could become a political football in election year, but had planned to return it immediately after the election.
Opinion polls have shown strong public support for legalising euthanasia, but any Parliamentary debate is now unlikely to occur until at least the next term unless another MP drafts a bill or Government takes up the issue.
Prime Minister John Key has previously said he supported speeding up the process of death for a terminally ill patient but he felt the End of Life Choice Bill went too far.
Green Party health spokesman Kevin Hague said he was disappointed the bill had been dropped but it was unlikely anyone in his party would take it up at this stage.
Mr Lees-Galloway, who is also the party's labour spokesman, was now working on a bill to ban "zero hour" contracts.