The company has told the Audit Commission it will stop auditing the accounts of around 1,000 parish councils on 1 November.
The move, which the commission expects will soon be mimicked by the other big accountancy firms, will add to pressure to streamline parish auditing.
Michael Dallas, head of public sector audit at PwC, said: 'Parishes are very small organisations - if they were companies or charities they would not be subject to full-scale audit. We believe it is better for them to be audited by a more local and smaller firm.'
A review of auditing requirements is under way after parishes complained auditing costs are consuming a vast proportion of their annual budgets.
Commission chair Dame Helena Shovelton said: 'Often a relatively light touch is applied but we know from experience that you can't presume everything is above board just because they have small budgets.'