"My decision comes down to this: In this four-year term, we can accomplish what I set out to do. In fact, we've already accomplished a great deal," he said.
"Serving as your governor is one of the greatest honors of my life," he said. "A year from now, it will be time for me to pass that privilege to someone else. I will not be a candidate for re-election."
Reporters questioned him afterward about whether this meant he would run for president, but he said that decision was "down the road" and "a lifetime away."
"(Sen.) John McCain said he thinks about being president every day in the shower," he said. "I guess I will turn to the words of Star Wars: It's in a galaxy far, far away."
The 58-year-old businessman, son of former Michigan Gov. George Romney, has spent less than three years in elective office, but in that time the state has closed a $3 billion budget deficit without raising taxes, schools have scored first in national math and science tests and Romney held out until the Legislature gave him a tough new drunken driving law he demanded.
Romney began calling supporters and other political figures during the afternoon to let them know of his decision, which was not a complete surprise. Romney had declared earlier this year he was "testing the waters" for a White House run.
Serving just one term allows Romney to leave with his record intact and focus on the presidential race, said Stuart Rothenberg, an independent political analyst in Washington.
"He doesn't want to run for re-election because he could possibly get beat," he said. "And he doesn't want to run for re-election because he could possibly win, and then have to turn around and start running for president immediately."
The governor said he sat down with his wife, Ann, to make a list of the things he wanted to accomplish as governor.
"Frankly there was very little to do for a second term that I could realistically accomplish," he said. "I said there is no reason to sit in the chair if the things you want to accomplish are done."
Romney has spent considerable time traveling to early voting states such as Iowa and New Hampshire, and sprinkled campaign cash across the country from a so-called leadership PAC used by presidential aspirants.
He had also distanced himself from the liberal political culture in Massachusetts. He vetoed a bill to expand emergency contraception — although the veto was later overridden — and campaigned against a 2003 ruling by Massachusetts' highest court that made the state the first in the nation to allow same-sex couples to wed.