It clears the way for Simon Coveney and Leo Varadkar to launch their campaigns to take over the party and become Taoiseach.
In a statement Mr Kenny paid special tribute to his wife Fionnuala, children and siblings “for their understanding of my work, and indeed for accepting the many intrusions of politics into family life in the interest of building our country”.
Simon Coveney has said Enda Kenny has been “a towering figure in modern Irish history”.
“When Enda took over the leadership of our Party we were broken and demoralised. With his vision, determination, positivity and relentless work-rate he led our Party back from defeat and to sustained electoral success, culminating in victory in the 2011 General Election and a record result for our Party,” he said.
“I am proud to have served in Opposition and then in Government with Enda. I saw at close quarters how skilled and driven he was to succeed for our Party, in Government and for our Country. His record in Government since 2011 will be viewed very positively by historians, not least how he led the restoration of our economic financial independence over that period, which was a landmark event.
“But it is not just these high profile moments that I reflect on, I recall the energy and excitement of a number of elections campaigns - any day on the campaign trail with Enda was a lively one; or those early days in Government when the economy teetered on the brink and Enda’s calm and clear headed leadership helped guide us through; or the late nights and long hours trying to construct a new coalition Government in 2016.”
Meanwhile, Fianna Fáil leader Micheál Martin has said Enda Kenny worked “diligently for his county, party and country over a long period of time”.
“While over the years we have had our differences on many political and policy issues, I have always appreciated Enda’s decency, good humour and approachability.
“I wish him well after he leaves office and I know that Fionnuala and the children will be happy to have much more time to spend with him in the coming months and years,” Mr Martin said.
“On my own behalf and on behalf of the entire Fianna Fáil Party I would like to acknowledge and thank Enda Kenny for his years of public service and to wish him good health and best wishes in all future endeavours.”
Sinn Féin’s Gerry Adams was less gracious in his comments, saying Mr Kenny “tried his best” but it “wasn’t enough”.
He said Mr Kenny came into office during crisis and leaves at a time of crisis.
After the Fine Gael leadership contest Mr Kenny will remain in place as Taoiseach for a “brief but appropriate period”. This will allow his successor to meet with Fianna Fáil and the Independent members of government before a Dáil vote to become leader of the country.
“I would like to stress the huge honour and privilege that it has been for me to lead our party for the past 15 years, in opposition and into Government on two successive occasions.
“I thank all our members, past and present for that privilege.
“I thank all my loyal constituents and supports in Mayo for their unstinting loyalty since 1975, and for their support for my family previously in providing unbroken service to the County in Dáil Eireann since 1954,” Mr Kenny said.
Minister for Social Protection Leo Varadkar and Housing Minister Simon Coveney are the early frontrunners for the job. However Justice Minister Frances Fitzgerald has not yet ruled herself out of contention, and there is speculation that Richard Bruton may run.
Mr Varadkar has tonight described Mr Kenny as “an extraordinary Taoiseach and Fine Gael’s most successful leader ever”.
Mr Kenny's announcement brings to an end months of speculation about his departure, prompted by his own admission that he would not lead Fine Gael into the next general election.
The statement in full reads:
"Last year I indicated that I would not lead the Fine Gael Party into the next General Election. I have decided to implement that decision today. Therefore I will retire as Leader of Fine Gael effective from midnight tonight, 17th May 2017.
"I will continue to carry out my duties as Party Leader in an acting capacity, until my successor is elected through the Fine Gael Leadership election process.
"I have asked that the Fine Gael Executive Council expedite this process and to have it concluded by close of business on Friday June 2nd.
"I want to assure people that throughout this internal process, I will continue to carry out my duties and responsibilities as Taoiseach in full.
"I intend to provide a brief but appropriate period for my successor to engage with groups and members supportive of Government, and with other Parties in the Dáil regarding provision of Government for the future.
"I would like to stress the huge honour and privilege that it has been for me to lead our party for the past 15 years, in opposition and into Government on two successive occasions.
"I thank all our members, past and present for that privilege.
"I thank all my loyal constituents and supporters in Mayo for their unstinting loyalty since 1975, and for their support for my family previously in providing unbroken service to the County in Dáil Éireann since 1954.
"I thank my personal staff for their commitment over many years to their duties.
"I especially want to thank my wife Fionnuala, our children, my siblings and their families for their understanding of my work, and indeed for accepting the many intrusions of politics into family life in the interest of building our Country. I could not have engaged as I did without that base."
Fine Gael party chairman Martin Heydon has tonight said Mr Kenny helped repair the economy and assist in the “rebirth of a self-confident ireland”.
“His leadership of Fine Gael since 2002 has brought us to our most successful period in Government as the largest Party in Dáil Éireann for the last two terms.
“His leadership style was compassionate, pragmatic and inclusive, building a strong team which he led with energy and enthusiasm. Having inherited a country and an economy that was decimated by mismanagement, Enda's strong leadership and ability to make hard decisions was recognised both at home and abroad and saw our international reputation restored and strengthened,” he said.
“In focusing on job creation, which saw 206,000 jobs created since the establishment of the Action Plan for Jobs in 2012, Enda Kenny followed Fine Gael’s key guiding principles of enterprise and reward for those who look to work and contribute to society, while creating and supporting a fairer society for those who are vulnerable and in need of support.
“Our principle of equality of opportunity was never more evident than when Enda led the marriage equality referendum to a resounding victory in 2015. His determination to deal with longstanding issues such as an apology for survivors of the Magdalene laundries, the children's rights referendum, and legislating for the X Case after over two decades of inaction by several previous governments who ignored a Supreme Court ruling, are a mark of the man.”
Since he was first elected as TD, his career as Fine Gael leader has been a series of ups and downs.
In 2002, party leader Michael Noonan led Fine Gael to its then worst performance, losing 23 seats. Taking over, Kenny rebuilt the party, winning back 20 seats in the 2007 election and a further 25 in the 2011 election.
He subsequently became the first Fine Gael Taoiseach to be elected to a second consecutive term on 6 May 2016, after two months of negotiations following the 2016 election, forming a Fine Gael-led minority government.
He is the first taoiseach from Fine Gael since John Bruton (1994-1997), and the first Fine Gael leader to be be re-elected to government since Garret FitzGerald in 1982. He became the longest-serving Fine Gael Taoiseach in April 2017.