John Barilaro will resign as the state's Deputy Premier and leader of the NSW Nationals.
The 49-year-old said on Monday that he would also leave politics, ruling out seeking preselection for the next federal election.
He said the pressures of the job had taken a toll, citing his high-profile defamation case against comedian Jordan Shanks and his month-long leave of absence last year after a bitter fight with the Nationals' Liberal coalition partners over koala policy.
"The fight is over. I've lost the fight," the Monaro MP said at a media conference.
"I don't have the energy any more."
Mr Barilaro, who has been Nationals leader in NSW for almost five years, said he would be a "keen watcher, but not participant" in politics.
Deputy Nationals leader Paul Toole, the MP for Bathurst, is the favourite to take over when the party meets on Wednesday to pick a new leader.
Mr Toole said in a media statement that "over the next 24 hours I'll consider how best I can serve our party and the people of NSW in this next period to build upon the foundations that he's laid".
The Nationals leader's most high-profile interventions in Hunter politics have been forcing former Upper Hunter MP Michael Johnsen to resign in March over a sex scandal and vowing to pick up the tab for offshore sand dredging to address Stockton's long-term beach erosion problems.
He confirmed his decision to quit on Monday, describing his role as "the honour and privilege of a lifetime".
He said in a media statement that emerging from lockdown could provide a new beginning for NSW, pointing to delivering schools and the Kosciusko Wild Horses Heritage Bill as some of his proudest moments.
"However, it is the little things, and the beautiful people I've met, of whom I now call friends, that have made being the local member so special," he said.
"In my time as Deputy Premier I experienced first-hand, alongside the communities of NSW, the effects of prolonged drought, the worst bushfires in living memory, severe storm and flood disasters and a 1-in-100 year global pandemic, and it was a privilege to work with our communities to endure and recover from those challenges.
"We thought 2020 was challenging, and then 2021 kept those challenges coming, but throughout these times, the resilience shown by the people of NSW has been truly inspiring.
"I was entrusted by the Premier, as an original member of the COVID Crisis Committee, to be the architect of the roadmap out of lock down in both 2020 and 2021, and it was a responsibility that I did not take lightly, but I considered essential, to deliver hope and certainty not just for NSW, but for the nation.
"The next Premier has big shoes to fill, but I wish them well and the best of luck, I will be cheering from the sidelines and I am excited for what is ahead under their stewardship."
Mr Barilaro said he would call a party room meeting on Wednesday where he will formally resign and call a ballot for his successor.
"Following that, I will work with the Speaker and the Electoral Commission in relation to a by-election for the seat of Monaro," he said.