His resignation had been expected after he said in 2012 that he would not try for another mandate. He has run the government of the small ex-Soviet Baltic country, population 1.3 million, for the past nine years.
Ansip made the announcement yesterday in a speech on the eve of Estonia's Independence Day celebrations.
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"Everything has a beginning and an end."
He described his tenure as having lasted a "reasonable" time and stressed that "this decision was not made under pressure by anybody".
Analysts said the resignation could be the result of Ansip's sliding popularity, and what is believed to be an ambition to become an EU commissioner following European elections in May.
Ansip, 57, took power in March 2005 when the then-premier resigned following a no-confidence vote against one of his ministers. He was elected to remain in the post two years later, and again in 2011.
Ansip's Estonian Reform Party is the biggest party in parliament, holding 33 of the 101 seats. It governs in coalition with the Pro Patria party, which gives it a majority of 55 seats
The Reform Party said Friday it thought Estonia's current EU commissioner for transport, Siim Kallas, could be tapped to become prime minister if Ansip resigned. Kallas was previously premier 2002-2003.
Estonian President Toomas Hendrik Ilves has two weeks to designate a replacement prime minister.
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