Ms Ardern choked back tears on Thursday as she said she did not have the energy to seek re-election.
"I know what this job takes. And I know that I no longer have enough in the tank to do it justice," she said.
"I would be doing a disservice to continue."
Ms Ardern said the Labour party would vote on a new leader on Sunday but her deputy Grant Robertson would not be a candidate.
The bombshell announcement came in Napier at the party's year-starting caucus retreat.
Ms Ardern was expected to announce an election date - which she did, for October 14 - but then stunned all-comers by declaring her exit from politics.
She said she left without regrets and offered a simple way she would like to be remembered.
"As someone who always tried to be kind," she said.
Ms Ardern also addressed her family - her fiance Clarke Gayford, who sat in on her press conference, and her four-year-old daughter Neve.
"Neve, mum is looking forward to being there when you start school this year," she said.
"And to Clarke - let's finally get married."
The race to succeed Ms Ardern as prime minister appears to be an open contest with Mr Robertson - the finance minister and a previous leadership aspirant - deciding not to stand.
"It has been the honour of my working life to have supported Jacinda as Minister of Finance and as Deputy Prime Minister," he said in a statement.
"Her intellect, judgement and empathy mark her out as one of New Zealand's finest leaders."
"As a colleague, a friend and a New Zealander I am incredibly grateful for her service and commitment and wish her every joy and success in the future."
Others who could stand include education minister Chris Hipkins, a close ally of Ms Ardern, foreign minister Nanaia Mahuta or immigration minister Michael Wood.
Under Labour rules, two-thirds of the caucus must support a candidate for the leadership at Sunday's vote or the contest will be thrown open to the wider membership.
Ms Ardern - who will continue as MP for the Auckland electorate of Mt Albert through to April - has requested this process be complete by February 7, the day after Waitangi Day.
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