"It just feels right," Daley said at a news conference billed as a major cabinet announcement. "I've always believed that every person, especially public officials, must understand when it's time to move on. For me that time is now."
He called the announcement "a personal decision, no more, no less" and said he and his family now begin "new phase of our lives."
The announcement not to run in the February election was made with little warning, but was not a surprise to everyone.
Daley has refused to say whether he would run again, fueling speculation that he might not, and his wife, Maggie, has been battling cancer.
"It's a surprise because there's been a Daley in the political system for so long," said Alan Gitelson, a Loyola University of Chicago political science professor. "There's always been this presence. It's been really part and parcel part of the identity of the city to have a Daley in the mayor's office."
Daley was first elected mayor in 1989, following in the footsteps of his father, who died of a heart attack while still mayor in 1976 at age 74.
--- Associated Press Writer Sophia Tareen contributed to this report.