Ms Capp, who was first elected mayor of the City of Melbourne in 2018 before being re-elected in 2020, has announced she won't contest the Victorian local elections in October.
The former Victorian director of the Property Council of Australia said she loved her job and had mixed emotions about quitting.
"I have given everything to this role," the former commercial lawyer said in a statement on Thursday.
Lord Mayor Sally Capp loves her job and has mixed emotions about quitting. (James Ross/AAP PHOTOS)
"As you know, I like to work at full pace, full-time - and I believe that anyone contesting the election must be all-in for a full term.
"I have decided that at 56, having spent my 50s so far at Town Hall, it's time for me to seek new opportunities to propel me into my next decade."
Ms Capp expects to finish up as lord mayor at the end of June and will work with councillors and the chief executive on an orderly transition plan.
Her deputy Nicholas Reece, a former adviser to prime minister Julia Gillard and Labor state secretary, will take over for the remainder of the term.
Ms Capp said she had no plans to enter state or federal politics.
"I'm not sure what's ahead but making an announcement today means that we can have some stability and certainty at Town Hall," she told ABC TV.
Melbourne has become Australia's largest city and the world's third most liveable. (Con Chronis/AAP PHOTOS)
Ms Capp said Melbourne council was in dire need of leadership when she was elected mayor, following the resignation of Robert Doyle amid sexual harassment allegations.
"There were significant internal and external issues - including a culture of unacceptable councillor behaviour and delays on major projects, such as the renewal of Queen Victoria Market," Ms Capp said.
"We faced acts of terrorism in the city, followed by the profound challenges of the global pandemic and long lockdowns.
"Despite this, together we have driven the revitalisation of this magnificent city - emerging as Australia's largest city, the world's third most liveable, and the fourth best student city globally."
Premier Jacinta Allan said Ms Capp told her she was quitting on Wednesday night and thanked her and commended her leadership.
"It was a pretty turbulent time at City Hall. She's stabilised the organisation," she told ABC Radio Melbourne.
"She's had to lead the city through the pandemic and I know from first-hand experience just how hard she has worked."
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