Grant Robertson, finance minister for Labour's six years in office, is resigning from parliament in March to be the University of Otago's vice chancellor.
"I have given absolutely everything I have had to these roles, but now is the right time for me to move on to a new set of opportunities and challenges," the 15-year MP said.
The former Wellington Central MP did not run for his electorate at the 2023 poll, which made clear his intention to leave after the election.
Mr Robertson, who has also recently suffered debilitating back problems, is a close friend and political ally of Jacinda Ardern.
Ms Ardern led tributes to the 51-year-old, crediting him with her start in politics.
"He is selfless, thoughtful, incredibly intelligent, fiercely loyal, and to top it off, one of the funniest people I know," she said.
"I can't imagine having worked with anyone better. Thank you Grant, we all owe you a debt of gratitude."
Mr Robertson, a University of Otago alumni and student union president, is the first non-academic to become vice chancellor in its history.
His departure is a fresh challenge for Mr Hipkins, who took over the prime ministership from Ms Ardern in January 2023 after her shock retirement.
Mr Hipkins, an affable Wellingtonian and career politician, was at the helm as Labour crashed from office at the 2023 poll.
At the time, he was seen as the preferred prime minister by 25 per cent of Kiwis in the final TVNZ poll before the election, which put him neck-and-neck with National party challenger Chris Luxon.
However, in TVNZ's latest political poll released this week, Mr Hipkins was supported by just 15 per cent of Kiwis to return to the top job.
Mr Hipkins said he "fully expected" the drop.
"I'm not the prime minister now, I'm not on the TV news every night," he said.
"I'd love it to be higher but I haven't had a particularly high profile in the last couple of months ... (I took) the first summer holiday I've had in four years.
"Everyone's entitled to a summer break and I don't think New Zealanders particularly wanted a highly political summer."
After polling just 27 per cent at the election - down from 50 per cent in the extraordinary 2020 result - Labour is rebuilding with a smaller caucus in opposition.
Mr Robertson is the third senior figure to exit since election day, joining former leader Andrew Little and deputy Kelvin Davis.
His departure clears the way for Porirua-based MP Barbara Edmonds to take the high-profile finance portfolio.
"Barb has a background as a specialist tax lawyer and is a formidable parliamentarian with experience across nine portfolios as minister, and several more as an advisor," Mr Hipkins said.
Ms Edmonds' promotion means for the first time in New Zealand history, both major parties have women in the most senior economic portfolio.
While Labour licks its wounds in opposition, the new right-leaning government - a coalition of the National, ACT and NZ First parties - has had plenty of issues of its own.
Dysfunction and debate over highly contentious policies over smoke-free legislation, Maori policies and a reconsideration of the Treaty of Waitangi have dominated the government's first three months.
Deflecting from his own numbers, Mr Hipkins said a bigger shock was that Mr Luxon had not improved his own support as prime minister - which remains at just 25 per cent.
"You'll hear more in the coming months from us about where we see ourselves," he said, responding to Labour's lack of post-election policy.
"The next election campaign still at least two and a half years away, assuming the government lasts that long."
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