Signalling an intention to take a leading role as prime minister - in contrast to Viktor Zubkov, the current holder of the office, who largely serves a technical function - Putin said he is ready to stay in the post "as long as Medvedev is president".
"The president is the guarantor of the constitution," Putin told the news conference. "He sets the main directions for internal and external policies.
"But the highest executive power in the country is the Russian government, headed by the prime minister."
Medvedev is seen as virtually certain to take the presidency at next month's polls, amid criticism by political opponents and some in the West that the vote will not be fair.
Putin insisted however that Russia was abiding by its international responsibilities and declared himself ready for a new post.
"It's necessary not to shed tears that this period of work has finished but instead be glad for the opportunity to take up a new post in which to serve my country," he said.
Putin also said his country does not plan a conflict with the West and would not direct its missiles at any state unless it had to.
"We are not going to re-target anything at anyone without extreme necessity," Putin said.
"The president is the guarantor of the constitution ... but the highest executive power in the country is the Russian government, headed by the prime minister"
Vladimir Putin, Russia's president
"We plan no conflicts [with the West] and we hope this will not happen in the foreseeable future," he said.
Putin reiterated statements made earlier this week Russia might target Ukraine if its former Soviet neighbour joined Nato and deployed elements of a US missile defence shield.
He has made similar threats about missile shield deployment against Poland and the Czech Republic.
Lambasting European countries for supporting independence for the Serbian province of Kosovo, he said they should be ashamed of their double standards and that international vote monitors should "teach their wives to make cabbage soup" rather than teach Russia how to behave.
The Russian president also addressed for the first time allegations that he had used his power to amass a personal fortune.
He said critics who have suggested he has become rich in office were spreading "nonsense" they had "picked out of their noses".
The news conference held at the Kremlin, which was televised live, was Putin's seventh and is expected to be the last before his second term in office ends in May.
Asked whether he had considered staying in power longer, Putin said it was "absolutely unacceptable" for him to cling to power for life.
"I had no intention to stay for a third term, never," Putin said.
"From the first day I assumed office as the president of the Russian Federation, I have always said I will follow the law."
Russia's constitution limits the presidency to two consecutive terms, although Putin's domestic popularity has led to calls from supporters for him to change the constitution and stay on.
Putin said it was "not shameful or frightening" for him to plan to hand over to Medvedev.
Officials on Thursday said that about 1,364 journalists were accredited for the news conference.