John Key has unexpectedly announced his resignation as New Zealand's prime minister, saying it was the right time to quit politics.

Mr Key, who had been widely expected to contest his fourth general election next year, said he wanted to ensure he did not make the mistake of some other world leaders by clinging onto power - and instead wanted to leave while he was "on top" of his game.

Speaking in a faltering voice, Mr Key (55) told a news conference: "Simply put, it has, for me, been the most remarkable, satisfying and exciting time of my life.

"But despite the amazing career I have had in politics, I have never seen myself as a career politician. I have certainly never wanted my success in politics to be measured by how long I spent in parliament."

But Mr Key, who recently marked his tenth year as leader of the centre-right National Party, said the role came with costs.

"For my wife Bronagh, there have been many nights and weekends spent alone, many occasions that were important to her that I simply could not attend," he said.

"My daughter Stephie and my son Max have transitioned from teenagers to young adults while coping with an extraordinary level of intrusion and pressure because of their father's job."

He added: "It would be easy to say I have made this decision solely to rediscover the personal and family life I once had, and that is a factor, but it is one among many."

Mr Key said he was not sure what life after politics would bring, other than he would probably take up positions on a couple of boards.

He said he would remain on as an MP long enough that he wouldn't force a special election ahead of next year's general election.

"All I can say is that I gave it everything I had," he said. "I have left nothing in the tank."

The National Party is set to meet next week to elect Mr Key's successor. Deputy Prime Minister Bill English is widely seen as the favourite to take over.

Read his speech in full here