Mr Ashdown, 57, insisted his decision had been taken so that he could spend more time with his wife, Jane, and their family. He said it had nothing to do with a rebellion inside his party against his strategy of forging closer relations with Labour.
Mr Ashdown said he would give up with "great sadness" but also with "some sense of achievement", as allies claimed he was the most successful Liberal leader since Lloyd George after doubling the party's number of MPs to 46 at the 1997 general election.
Mr Ashdown decided before the last election that it would be his last as Liberal Democrat leader, and he said he had told Tony Blair shortly afterwards. He had originally planned to announce his decision last year, but decided to see through his "unfinished business", such as extending the remit of a cabinet committee on which senior Liberal Democrats sit alongside Labour ministers.
The sudden departure puts a question mark over the close working relationship Mr Ashdown struck up with the Prime Minister. Mr Blair's aides stressed last night that he would not be deflected from his goal of forging a new, progressive centre-left alliance.
But Mr Ashdown's policy of "constructive opposition" with Labour is bound to be the crucial issue in the June leadership contest to choose his successor. Many of the party's 100,000 members, who will elect the new leader in a postal ballot, are hostile to his strategy.
At least five candidates are expected to enter the race. They are Charles Kennedy, the party's former president who is now its agriculture spokesman; Simon Hughes, the health spokesman; Menzies Campbell, who holds the foreign affairs and defence brief; Don Foster, the education spokesman; and Nick Harvey, the campaigns chief.
Mr Ashdown's decision to stand down after the European Parliament elections may also put pressure on Mr Blair. Many Labour MPs oppose closer Lib-Lab links, and cabinet heavyweights including John Prescott, the Deputy Prime Minister, and Jack Straw, the Home Secretary, will hope the change of leadership will put a brake on Mr Blair's strategy. The Liberal Democrat leader dismissed speculation that he was standing down to take up a government post. Downing Street sources denied that Mr Blair would nominate Mr Ashdown to serve on the European Commission, saying the job would go to a Conservative.
Mr Ashdown made his announcement at the weekly meeting of his MPs at Westminster last night. Later he disclosed he would not have taken a cabinet post in a Lib-Lab coalition government. "I would not have taken a place in the Cabinet. I would have wanted to do that from the outside," he said.
He told Mr Blair at their first meeting shortly after the election to discuss their strategy that he intended to step down from the leadership in mid-term. Mr Ashdown told the Prime Minister last week that he would be announcing his departure after their clash at Question Time yesterday.
Both Mr Blair and Mr Ashdown agreed that their "project" had been secured. The Liberal Democrat leader stayed on until the European elections legislation was on the statute book, but he delayed his departure after the resignation of Peter Mandelson, the Cabinet's strongest supporter of close Lib-Lab links, fuelled speculation of a cooling of relations.
Mr Ashdown also wanted to ensure that the latest extension of co-operation with the Government went through last week, before finally deciding the date of his announcement. "I didn't want anyone to think that the project which Blair and I were engaged in was going to be disturbed by those events," he said.
"I inherited the party in a complete mess. I wanted to hand the party over stronger with a clear strategy in a strong position engaged in government and doing something important. That is what I have been able to do," he said.
Lord Holme said the MPs at the meeting were "stunned, saddened and surprised". But a handful of senior Liberal Democrats had been told at an earlier private meeting about Mr Ashdown's plans. Others had suspected for some time he was planning to go, and were already privately forming rival camps.
The most relieved person at Westminster last night was Jane, Mr Ashdown's wife. "We never see each other. Weekends belong to the party as well as the week."
In a letter to MPs, which Mr Ashdown read to them, he said: "Though I love being an MP, I don't want still to be one at 65. And that means not standing at the next election when I shall be 60."
Paying a warm tribute to Mr Ashdown last night, Mr Blair said: "He is one of the outstanding party leaders of his generation."
A spokesman for the Prime Minister said he viewed Mr Ashdown as "a politician of considerable distinction who makes a major contribution to his party and country."
He said: "Of course the links between the Government and Liberal Democrats will continue to develop both in Mr Ashdown's remaining time as leader and thereafter."Reuse content