Queensland Senator Jan McLucas will not be contesting the next federal election due in 2016.
She said this follows a Labor pre-selection process that has taken place over the past three weeks.
In March, two senior Queensland state MPs urged party members to back their former colleague Murray Watt over Ms McLucas as candidate on the senate ticket, News Corp reported.
Mr Watt lost the seat of Everton in Labor's crushing 2012 state election defeat.
Preselection for Ms McLucas' replacement closes on Friday and a candidate will be chosen following the party's normal procedures, an ALP spokeswoman told AAP.
In the meantime, she will continue as Labor's spokeswoman for mental health and housing and homelessness.
The senator was first elected to parliament in 1998 and has served in both opposition and government in a number of policy areas - ageing, disabilities and carers, health and was minister for human services.
"It has been a privilege to represent the people of Queensland in the Australian Senate," she said in a statement on Sunday.
In particular, she believes the national disability insurance scheme that was designed in government with now opposition disability reform spokeswoman Jenny Macklin is a "great Labor legacy" that the party can be extremely proud of.
In a separate joint statement, Opposition Leader Bill Shorten and his deputy Tanya Plibersek said Senator McLucas has been an outstanding member of the Labor team.
"The Federal Parliamentary Labor Party will forever be grateful for Senator McLucas service, and we sincerely thank her family for their contribution too," they said.
Further comment is being sought from the ALP.
