Spain's Prime Minister Jose Louis Rodriguez Zapatero announced Saturday he would not be seeking a third term, reported dpa.
Zapatero, who has been prime minister since 2004, made the announcement to a meeting of his Socialist party (PSOE) in Madrid, telling them he would not be standing again for reelection as party head.
"My mind is made up. Thank you for your respect and your affection," he said. Zapatero said two terms of office was enough and his decision was best both for the party and for his family.
National elections are due to take place in March 2012. Zapatero said he planned to stay on as premier until then.
The 50-year-old has led the country since 2004, when he won power in the immediate aftermath of the Madrid train bombings, but his popularity has fallen rapidly since the financial crisis.
Spain, suffering high youth unemployment and a bust construction sector, has imposed drastic savings measures.
The PSOE is currently 15 points behind the Conservative People's Party (PP) in opinion polls.
Local elections are also due in Spain, on May 22, in which the PSOE is expected to fare badly.
Although Zapatero tried to modernise Catholic Spain with more liberal laws on gay marriage and abortion, and promoted several women to his cabinet, the government's lowering of civil service salaries, freezing of public sector pensions and reducing employment protection measures have proved unpopular.
"We have made mistakes, but we will always stand by them," Zapatero said.
Likely favourites to succeed Zapatero as PSOE party chief include the current Interior Minister and Deputy Prime Minister, Alfredo Perez Rubalcaba and the Defence Minister, Carme Chacon.