Mr Howard declined to say how long he would stay on as leader of the conservative Liberal Party if re-elected, saying he would continue "as long as my colleagues want me to".
Mr Howard gained power in 1996 and is only the second Australian prime minister to reach 10 years in office. Treasurer Peter Costello will remain in cabinet as his deputy.
Speaking during a news conference at Innisfail in north Queensland, he said after extensive talks with colleagues, there was a "very strong view" that the current leadership team continue at the next poll, due in 2007.
He also praised Mr Costello, saying his rival for the party leadership had made a wonderful contribution to the government.
"Can I say that Peter Costello has made a wonderful contribution to the government and it's crucial to our prospects at the next election that he continue not only as deputy leader but also as treasurer, where his work has been so important to our efforts over the past 10 years," he said.
Task ahead
He said the government faces quite a task winning the next election, and committed himself to continuing as Liberal leader with "enthusiasm and vigour".
"Australian politics always produces competitive contests federally and the next election will be no exception.
"We need the best people in the right places and the party has said very clearly it wants me where I am and Peter Costello where he is and I know they will be very, very pleased indeed if that continues to be the case."
Costello ambitions
The decision will disappoint the the ambitious 48-year-old Mr Costello, who earlier this month accused his boss of reneging on an old promise to step down midway
through his second term as prime minister.
"My consultation with my colleagues - and I think this is backed by public opinion - leads me to believe that they want me to continue to work as I have in the past as the deputy leader and treasurer," he told reporters in Melbourne.
"And so I have decided that I will continue to work for the re-election of the government as the deputy leader and the treasurer."
Beazley 'relishing opportunity'
Labor's treasury spokesman Wayne Swan said Mr Beazley was confident of beating Mr Howard, and dismissed suggestions he would have a better chance if Mr Costello was contesting the election as leader.
"Kim Beazley is looking forward to both facing and defeating John Howard at the next election," he told ABC Radio.
"I think he relishes that opportunity.
"John Howard has given Kim Beazley plenty of opportunities, broken with his trust in the Australian people on interest rates, on wages and working conditions.
"They'll be the very big issues for the next election which Kim Beazley can win."
Mr Swan said the Labor party was confident it could win up to 15 seats, especially in the wake of industrial relations changes and leadership tensions.