Annegret Kramp-Karrenbauer, also known as AKK, blamed the "unresolved relationship of parts of the CDU with the (far-right) AfD and (far-left) Left party" for her decision to depart.
The woman widely seen as German Chancellor Angela Merkel's chosen successor gave up on leadership ambitions on Monday, falling victim to a growing crisis over ties between the centre and far right.
Annegret Kramp-Karrenbauer, the leader of the centre-right Christian Democratic Union (CDU) known as AKK, fell on her sword after barely a year in the post, a period marked by internal battles over whether to cooperate with the anti-immigrant Alternative for Germany (AfD).
AKK blamed the "unresolved relationship of parts of the CDU with the (far-right) AfD and (far-left) Left party" for her decision to depart, a party source told AFP.
While the party has a policy of no cooperation with either far left or far right at a national level, regional CDU lawmakers last week went rogue and voted in the same camp as MPs from the AfD to oust a far-left state premier in tiny central Thuringia.
AKK's attempts to impose rigid no-cooperation discipline from Berlin have foundered especially in Germany's former communist east, where strong showings for the AfD and Left in some states threaten the ability of mainstream parties' to form functioning coalition majorities.
The breach in the political dam towards the AfD in Thuringia prompted Merkel's junior partners in the national government, the Social Democratic Party (SPD), to call urgent talks at the weekend about the partnership's future.
AKK's departure, the most prominent political head to roll after the Thuringia crisis, was "unsettling," SPD board member Michael Roth tweeted Monday.
"It is still less certain whether decent democrats stand together in the battle for democracy and against nationalism," he added.
Voting alongside the far-right breaches one of the fundamental taboos of post-World War II German politics, the refusal of mainstream parties to work with the extremes.
Her inability to keep her troops in line prompted AKK to tell a meeting of the CDU's leadership "she will not be a candidate for the chancellery", the source said.
The move finally ends the role as heir apparent she had held since even before she was heaved with Merkel's backing into the party's top job.
Germany's next national elections must take place by autumn next year, although the fractious coalition between the CDU, its Bavarian CSU allies and the centre-left SPD may not hold until then.
By this summer, AKK hopes to have organised a process to find the person to lead the CDU into the next federal campaign.
"It is clear that the party leadership and the chancellorship must be held by the same person," she told fellow leaders – an implicit rebuke to Merkel's 2018 decision to split the offices.
The veteran chancellor gave up on the party leadership as a string of regional defeats and the growth of the far-right undermined her popularity within her own ranks.
Race to the top
Despite Merkel naming her defence minister last July to lend her the authority of federal office, AKK never managed to stamp her authority on the CDU after her narrow win over challenger Friedrich Merz.
Her bowing out now reopens the race to succeed Merkel.
She has been in power since 2005, but said she would not run again for the highest office at the same time she gave up the CDU leadership.
Merz, a former rival of Merkel's, has been waiting in the wings ever since AKK prevailed in the leadership election, and still enjoys strong backing from the pro-business and more conservative wings of the party.
Just last week, the former CDU parliamentary leader gave up his job at giant asset manager BlackRock "to support the party more strongly in its renewal and re-enter politics", he said.