Education Minister Ruairi Quinn announced he is resigning as a minister "to give a new generation a chance to lead".
Mr Quinn - whose career in politics spans four decades - said he will also retire from politics at the next general election.
He took to the plinth at Leinster House at noon to make the announcement.
An emotional Mr Quinn (68) said: "I will not seek to continue as a member of government after the election of the new leader of the Labour Party.
"My resignation as minister will take effect on the day that the Taosieach and Tanaiste announce their reshuffle."
Discussions with Taoiseach Enda Kenny on the make-up of the new Cabinet are likely to begin over the weekend after the Labour Party election to replace outgoing leader and Tanaiste Eamon Gilmore.
It is widely expected that Social Protection Minister Joan Burton will beat her rival, Junior Health Minister Alex White, to be announced as party leader on Friday.
Mr Quinn said that in stepping down as a minister: "I want to ensure that the new leader of my party - whoever that may be - has the opportunity to create their own team on their own terms, an opportunity to give a new generation a chance to lead, a chance to rebuild our party and to finish the work of cementing a real recovery for all of the Irish people. I believe that our new leader, Joan or Alex, can do that work with the support of a new generation of politicians."
Mr Quinn also confirmed he will not stand in the next general election "whenever that may be".
He said: "While doing so I want to pause to thank the people of Dublin South-East for giving to me the honour to represent them for so many years.
"I want to make clear that between now and then the new leader and ministers who represent the Labour Party will have my full support as a member of Dail Eireann."
The architect and father-of-three concluded his statement saying: "Finally, like all others who serve in public office, I want to acknowledge that my time in office would have been impossible without the support of my entire family and I will always be grateful for that support."
In recent months Mr Quinn has been battling with teachers' unions over the introduction of revolutionary changes to he Junior Certificate, one of the key policies from his times at the Department of Education.
He has held a total of six ministerial positions over the course of his political career.
Mr Quinn previously served as Finance Minister during the 1994 to 1997 Rainbow Coaltion of Fine Gael, Labour and Democratic Left.
Former Fine Gael Taoiseach John Bruton commented on Mr Quinn's impending departure as minister, saying: "The Labour party represent a very strong authentic tradition in Irish politics going back to the early years of the 20th Century and I know that Ruairi Quinn himself is very conscious of the history of the Labour Party and of its contribution to democracy."
Mr Quinn's resignation will leave another vacancy to be filled in cabinet.
Justice Minister Alan Shatter's resignation in May also left a vacancy at the Department of Defence which also fell under his remit.
Taoiseach Enda Kenny's department currently has responsibility for defence.
Meanwhile, a senior minister is expected to be named as Ireland's next EU Commissioner to replace Maire Geoghegan-Quinn.
Fine Gael Environment Minister Phil Hogan has been tipped to take that role although Labour is also pushing for departing leader Mr Gilmore to get the Brussels job.
Pat Rabbitte in ageism row with RTE presenter, see page 12