Blair has been under pressure following a series of resignations from his Labour government over his continued leadership of the party.
"The next party conference in a couple of weeks will be my last party conference as party leader," the prime minister said in a televised statement.
But Blair refused to set a fixed date for his exit.
"I'm not going to set a precise date now, I don't think that's right. I will do that at a future date and I'll do it in the interests of the country," he said.
Blair also apologised to the British public for the open infighting that has wracked the governing Labour Party over the past week.
His finance minister and expected successor, Gordon Brown, eager to heal damaging divisions in the party, earlier said he would support Blair's decision and stressed that it was for the embattled premier to decide when to go.
Brown said before the announcement that this "should not be about private arrangements but what is in the best interest of our party and most of all the best interest of our country and I will support him in doing exactly that".
Ruling Labour is seeking new leadership in the run-up to a general election in 2009.
Sky Television, citing senior Labour members, said the prime minister would step down as party leader on May 4, 2007, and a new prime minister would take office in mid-June.
The BBC also said Blair would go in early May.
With party colleagues running scared about his purportedly growing unpopularity, a junior minister and seven government aides resigned on Wednesday after calling on him to step aside.
Blair's popularity has tumbled in opinion polls after government scandals over sleaze and mismanagement were compounded by controversy over the wars in Iraq and Lebanon.
David Miliband, the environment minister and a loyal Blair ally, who has been tipped as a future prime minister, said Labour needed Brown in charge.
"Either we have a smooth transition or you have a train crash," Miliband told the New Statesman magazine in comments published on Thursday.
"What I believe is that we need more than a smooth transition to Gordon Brown - we need an energising, refreshing transition to Gordon Brown."