Joe Hockey has told his coalition colleagues he will be resigning from parliament at the end of this week.
The former treasurer, a casualty of the Liberal leadership change, will deliver a final speech to parliament on Wednesday.
His resignation will require a by-election in his safe seat of North Sydney.
Mr Hockey told colleagues it was important to leave the parliament with dignity.
He said he was very optimistic about Australia's future and wanted the Turnbull government to be the best in the country's history.
However the former treasurer warned the "revolving door of politics" had to stop.
Former prime minister Tony Abbott told the joint coalition party room meeting on Tuesday he was thankful for Mr Hockey's service after six years of the "closest possible relationship".
Mr Hockey had been a remarkable steward of the G20 under Australia's presidency, he said.
The 2014 budget - the first to be delivered by Mr Hockey - was politically difficult but vital, big, bold and brave.
Mr Abbott quoted Theodore Roosevelt's 1910 Paris speech about the man who "is actually in the arena ... who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly so that his place shall never be with those cold and timid souls who neither know victory nor defeat".
After a standing ovation, Mr Turnbull described Mr Hockey as a man of great charisma and wit and "friend to all of us".
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