UPDATED 7.48pm John Key has resigned as Prime Minister of New Zealand.

He told his Cabinet of his decision this morning, and made the announcement at his weekly press conference this afternoon.

LISTEN ABOVE: Outgoing PM John Key speaks to Larry Williams

John Key has told Larry Williams this was the toughest decision he has ever made.

“By a country mile it’s a magnificent job its and absolute privilege and it’s a real opportunity.”

“I’ve seen leaders stay that little bit too long.”

He gave the example of former Australian PM John Howard.

Key said it was lonely for Bronagh who he has been married to for 32 years but denied that she had led him to make the decision.

“We talked about it and she likes the concept of me being home more but there was no ultimatum.”

Key has celebrated eight years as Prime Minister and a decade as leader of the National Party.

• Replacing John Key: The contenders

The National Party caucus will hold a meeting on December 12 to decide the new party leader and Prime Minister.

Newstalk ZB political editor Barry Soper said attention will now be turned to who will take over.

"Like Helen Clark, there's no natural successor in line, so this is indeed a big announcement from the Prime Minister, and totally unexpected."

Key said caucus has a number of fine individuals to choose from - but if Bill English puts his name forward - he will get his vote.

"Bill has I believe grown a great deal since he was last the party leader."

"15 years on he is more experienced - I believe that National under Bill English's leadership would win the election in 2017."

Soper said it's a shock move.

"Certainly the expectation was that he would be seeking and possibly win a 4th term."

"He said being Prime Minister for the last 8 years has been hard on his family, he obviously wants to give more time to them." 

Former National leader Don Brash has been left stunned by Key's announcement.

"It certainly wasn't expected by me, or as far as I know anyone else. Most people thought the Prime Minister was keen to get a 4th term."

Politics professor Raymond Miller agreed, saying most would've been expecting his departure after the election.

"Some time between 2017 and 2020, so for him to go now almost a year out from the election is a real shock."

The president of the National Party says despite John Key's popularity, his resignation won't leave the party disadvantaged.

Peter Goodfellow told Larry Williams Drive it was actually Mr Key's intention to give the party a new face.

"He introduced the style of politics that over the last eight years has seen us obviously go from about 45% to 47-48% support, but I think the party is bigger than any one man, and John is the first to admit that."

During the press conference Mr Key outlined his highlights including the overhaul of justice agencies, trade liberalisation and advanced race relations.

Key said the job had meant an extraordinary level of sacrifice, intrusion and pressure for his family as well as opportunities.

Party Leaders React

In reaction, New Zealand First Leader Winston Peters said of the resignation: “The fact is that the economy is not in the healthy state that the Prime Minister has for so long claimed, and there are other issues which have caused this decision as well.

“The New Zealand public should have been informed of this a long time ago.

“Clearly the Prime Minister does not believe the superficial polls any longer.

“Contrary to certain perceptions the Prime Minister and his Finance Minister are unable to muddy the waters anymore.”

Labour leader Andrew Little paid tribute to Key's Prime Ministership on twitter. 

John Key has served New Zealand generously and with dedication. I wish him and his family the best for the future.

— Andrew Little (@AndrewLittleMP) December 5, 2016

I fought every day against John's politics but always supported his right to be a dad & a husband first. I wish him and his family well.

— Metiria Turei (@metiria) December 5, 2016

Maori Party co-leader Te Ururoa Flavell said his party would forever be grateful to Key for "making a space at the table of his Government" for the Maori Party.

“We may not have agreed on everything but we’ve always maintained a respectful relationship with the Prime Minister and he with us.”

Flavell's co-leader Marama Fox said despite some tough talks between the parties, respect had prevailed.

“We’re all about whānau in the Maori Party, so we understand and support Mr Key’s call to return to his family and be with them more.”

Both Fox and Flavell said they were confident that the new Prime Minister would continue the "mana enhancing" relationship with the Maori Party.

Wishing @johnkeypm & his family all the best for the future. He has advocated tirelessly for NZ internationally these past 8 years.

— Helen Clark (@HelenClarkUNDP) December 5, 2016

Fellow National MPs have been unanimous in paying tribute to Key. 

JOHN KEY'S CAREER IN POLITICS

John Key has led the National party since 2006.

He built a career in foreign exchange in New Zealand before continued success in the industry overseas.

Mr Key entered Parliament in 2002 as National's representative for Helensville.

In 2004 he was appointed Finance Spokesman for the party and succeeded Don Brash as party leader in 2006.

He then led his party to win the election in November 2008 and repeated the victory in 2011 and 2014.

* Economy: The government guided the economy through the Global Financial Crisis, with economists branding New Zealand the "rockstar economy" of the OECD in 2014 and the dollar taking a hit on Mr Key's resignation.

* But it also only announced its first surplus in 2015, despite long-time promises.

* Disasters: Mr Key also led the nation through the Christchurch earthquakes and rebuild, the Pike River Mine disaster and recently the Kaikoura quake - all which continue to make national headlines.

* Reform: Since 2008, the government has passed wide-ranging and often controversial reforms, including tax cuts, welfare reforms, labour law changes, an overhaul of the justice sector and a partial selldown of state assets.

* Polls: Under Mr Key's leadership National has polled consistently well, still nudging 50 per cent in some research ahead of his third-term resignation.

* Flag: The PM was left disappointed after championing an unsuccessful campaign to change the country's flag earlier this year - seen by some as a "legacy project."

* Ponytail : He came under fire and made global headlines after pulling 26-year- old Auckland waitress Amanda Bailey's hair against her wishes while she was working.

* TPPA: Mr Key oversaw the signing of the much-protested Trans-Pacific Partnership Agreement - and was still championing the deal days before it was put on ice by US President-Elect Donald Trump.

* The Prime Minister also gained a reputation for occasional awkwardness over the years: being caught in a three-way handshake with Richie McCaw at the 2011 Rugby World Cup, showing off some less than elegant dance moves and drawing fire over a few radio interviews which struck some as too casual.

Additional reporting by NZ Newswire