Her power has been on the wane since her fateful 2015 decision to keep Germany's borders open, ultimately allowing in more than one million migrants
Angela Merkel will step down as German chancellor when her mandate ends in 2021, a party source told AFP Monday, after a series of political crises and regional vote debacles rocked her fragile coalition.
Often hailed as the world's most powerful woman and Europe's de facto leader, a weakened Merkel has faced growing calls to spell out her succession plans after 13 years in power.
Speaking at a meeting of her centre-right Christian Democratic Union on Monday, a day after a bruising state poll in Hesse, Merkel told top brass that she planned to give up the party leadership, a role she has held for 18 years.
She said she wanted to complete her fourth stint as chancellor but stressed that it would be "her last term", a party source told AFP.
"She was genuinely sad and not at all bitter and asked that the discussion about her succession be conducted in a kind manner," the source said, adding that Merkel's words were greeted with a standing ovation.
Germany's veteran leader had been widely expected to run for reelection as CDU leader at a party congress in December.
Merkel had until now always insisted that the posts of party chief and chancellor in Europe's top economy should be held by the same person.
She is due to give a press conference at 1200 GMT.
Merkel's power has been on the wane since her fateful 2015 decision to keep Germany's borders open, ultimately allowing in more than one million migrants.
The mass arrivals deeply polarised Germany and are credited with fuelling the rise of the far-right.
Railing against the newcomers, the anti-immigrant AfD is now the biggest opposition party in the Bundestag, and after a strong showing in Hesse on Sunday now has seats in all of Germany's state parliaments.
AfD leader Joerg Meuthen hailed Merkel's eventual departure as "good news".
AKK to take the reins?
Die Welt reporter Robin Alexander said the path could now be clear for Merkel's chosen heir, CDU general secretary Annegret Kramp-Karrenbauer, to take the reins if no other credible candidate emerges by December.
"The two women have taken back the momentum, because none of their opponents were ready for this," he tweeted.
But other candidates are also waiting in the wings, including ambitious health minister Jens Spahn, a frequent Merkel critic.
Merkel's surprise news comes after the CDU and its junior federal coalition partner the Social Democrats (SPD) suffered heavy losses in an election in the state of Hesse on Sunday.
Just two weeks earlier, Merkel's conservative CSU sister party suffered a similar drubbing in Bavaria.
Both polls were seen as damning verdicts on Merkel's grand left-right coalition in Berlin which has lurched from crisis to crisis, often over the hot-button issue of migration.
'Mistake' to cling to power
The Frankfurter Allgemeine Zeitung said on Sunday it would be "a mistake" for Merkel to cling to power.
"By passing the baton of her own free will she would show that she knows the same thing everyone knows: the end of her chancellorship is approaching."
Merkel's first step towards the exit door is likely to send ripples across the European Union, where she has served a beacon of stability as bloc grapples with multiple global crises, Brexit and an unpredictable ally in the White House.
While still widely respected abroad, her recent domestic woes have kept Merkel away from the European stage, thwarting French President's Emmanuel Macron's push to reform the eurozone with Merkel by his side.
Despite her global standing, Merkel has no plans to seek a post in the European Commission after bowing out of German politics, the CDU source told AFP, despite speculation to that effect in Brussels.
But the woman dubbed the "eternal chancellor" may not get to choose her own timetable -- and her departure could be hastened if her junior coalition partner brings down the government before 2021.
SPD chief Andrea Nahles said her centre-left party, Germany's oldest, had failed "to break free from the government" and carve out a clear profile of its own after serving in multiple, compromise-laden "grand coalitions".
She said the SPD would now propose a "discussion paper" in Berlin demanding concrete progress on key issues by next October, including pension rights and better childcare, before deciding whether to remain in the coalition.
Increasing numbers of SPD members have been calling for the party to quit the government and lick its wounds in opposition, as it is presently polling below AfD nationwide, at 15 percent to the far-right's 16 percent.