Mitch Daniels, President Bush's budget director, will resign within the next 30 days, the White House announced Tuesday.
Daniels wants to open the way for an expected run for Indiana governor, aides said.
The upcoming resignation was announced by White House spokesman Ari Fleischer, who told reporters that Daniels made his intentions known earlier Tuesday in a meeting of senior White House aides.
CBS News Correspondent Mark Knoller reports that Fleischer said Daniels was not asked to resign.
"The president appreciates his service to the nation," Fleischer said. "The president will miss him."
Daniels' departure comes as the White House was having a hard time winning congressional approval for its economic stimulus and tax-cut package.
His run for the statehouse had been widely anticipated. Daniels was not expected to formally announce his candidacy until this summer, and those close to him emphasized that a final decision had not yet been made.
Daniels has held the budget post since the beginning of the Bush administration, and his departure will mean that the president's entire initial economic team is gone. Fleischer said that no decision had been made on a successor.
Clay Johnson, a longtime Bush friend whom the president named to the No. 2 job at the budget agency, is in line to replace Daniels, according to several officials who spoke on condition of anonymity.
But two Republicans, also speaking on condition of anonymity, said the White House had been unable to clear his nomination past key members of the Senate. These officials declined to say what objections were raised.
Within the past six months, Mr. Bush replaced his first Treasury secretary, Paul O'Neill, with John Snow; and his former head of the National Economic Council, Lawrence Lindsey, with Stephen Friedman.
But unlike O'Neill and Lindsey, Daniels was not forced out of the job.
Daniels has been a favorite of conservatives for his frequent clashes with Congress over spending. Assigned the role of keeping the price tag of spending legislation in check, he has had testy relationships with lawmakers of both parties from the House and Senate committees that oversee expenditures.
He once accused New Yorkers of "a little money-grubbing game" for pursuing $20 billion Mr. Bush promised — and later provided — to rebuild from the Sept. 11 attacks. He called congressional mandates on federal agencies "Lilliputian do's and don'ts," and said, in The Wall Street Journal, about lawmakers, "Their motto is, 'Don't just stand there, spend something.' This is the only way they feel relevant."
Even so, Daniels showed few signs of backing down and seemed to relish his job as administration tightwad.
"The only words I've said that contribute to tension are 'no' and 'enough,"' he said.
Daniels, 54, was born in Monongahela, Pa., but moved with his family to Indiana at an early age. After graduating from Princeton University, he began working for then Indianapolis Mayor Richard Lugar, and journeyed with him to Washington when the Republican became a senator in 1977.
Daniels was also a political adviser to President Reagan before returning to Indiana, initially as vice president of the conservative Hudson Institute think tank. He then joined the Eli Lilly and Co., holding various top jobs at the pharmaceutical giant before becoming budget director.
In his more than two years as budget chief, Daniels has rented a one-bedroom Washington apartment and commuted home on most weekends to see his wife and four daughters.
When at home in Indianapolis, he has made occasional public appearances that fed speculation that he was interested in keeping his name in the local limelight in case he decided to run for governor.