"This morning I announced that I will not seek a third term as governor. After much thought and discussion I know it's the right decision for me and for my family," Gregoire said in a statement.
The chairman of the state Democratic Party when Gregoire first ran for governor in 2004, Paul Berendt, said he held out hope she'd go for another term but noted the past six years have "been a meat grinder for her," The Seattle Times reported.
Gregoire won a bitterly contested first election by a margin of only 133 votes after enduring two recounts and a court challenge that put a bitter taste in the mouths of Republicans.
But by the end of 2006, billions of tax dollars fueled by a healthy economy allowed Gregoire to increase state spending, with much of it going into education, the Times said.
"These are good times, these are exciting times," she said. "Now is the time to make investments in the future."
In 2010 after weathering the economic collapse, however, the situation had turned around 180 degrees and the once-optimistic governor had to announce $4 billion in cuts.
"I hate my budget," Gregoire said, her voice shaking. "I hate it because in some places I don't even think it's moral."
The governor closed her Monday statement by saying she still had a lot to do in the 18 months she has left in office and was ready "to get to work on the task at hand."
In a statement, President Obama lauded the governor for her years of dedication.
"As a fierce advocate for American businesses, she continues to work tirelessly to promote American goods, open up new markets and strengthen American businesses abroad," the president said. "Michelle [Obama] and I, along with the people of Washington, will miss her outstanding leadership and thank her for her years of service."