Berlusconi, 74, told the newspaper La Repubblica he will be too old to run again in 2013 and will back Angelino Alfano, 40, recently named leader of his People of Freedom party, ANSA reported.
"I will campaign, and I'll help Angelino," Berlusconi said. "I'll be the father figure. … At 77 years of age I can no longer be premier."
He said he has no interest in becoming president and touted longtime aide Gianni Letta, 76, for that position.
Despite his legal troubles and recent local election losses, Berlusconi said the government would last until 2013.
But he criticized his own economy minister, Giulio Tremonti, for "just talking to the markets" with his proposed austerity measures.
"He thinks he's a genius and thinks everyone else is a cretin," Berlusconi said. "I put up with him because I've known him for a long time and you have to take him as he is, but he's the only one who doesn't play with the team."
Alfano, Italy's youngest-ever justice minister when he took the post in 2008, is known as the author of the Alfano Law, The Daily Telegraph said. The law shielded Berlusconi and other political leaders from prosecution, although the Constitutional Court has removed much of the protection.
A Sicilian, Alfano said he joined Berlusconi's earlier political party, Forza Italia, after seeing the leader on television in 1994.
"When I was 23 I saw a businessman on television who had a passion for freedom, who had the sun in his pocket," he said.