David, 47, will be moving to New York as president and chief executive of the global charity International Rescue Committee, putting a firm end to speculation over his return to frontline politics as a challenger to his brother Ed.
His decision to step down as South Shields MP marks the wrapping up of what the British media has characterized as a "soap opera" ever since younger brother, Ed, beat him in a leadership battle for the Left-wing party two years ago.
In a letter to his constituency party chairman in South Shields, he said it was "very difficult" for him to be leaving UK politics.
"After the leadership election, I felt I could be most helpful to the party on the front line, in South Shields, and around the country, rather than on the front bench in Parliament," he said.
"I felt this gave Ed the space and at the same time the support he needed to lead the party without distraction. He has done so with real success, leading a united team that has taken the fight to the Tories. I am very pleased and proud that our shared goal of making this a one-term government is achievable," he added.
Ed Miliband said he "will miss" his brother and that "British politics will be a poorer place without David".
In reference to his move to the US, David Miliband said that joining the IRC would give him the opportunity to help some of the most desperate people in the world.
"The organisation was founded at the suggestion of Albert Einstein in the 1930s for those fleeing the Nazis, so given my own family history there is an additional personal motivation for me. I feel that in doing this job I will be repaying a personal debt," he said.
"I will forever be Labour. But after writing two election manifestos in 1997 and 2001, and serving as a minister for eight years, I now have to make a choice about how to give full vent to my ideas and ideals," he added.
There had been growing speculation in recent weeks that Miliband could make a return to the Labour front bench, potentially replacing fellow party MP Ed Balls as the Shadow Chancellor.
Last year, Ed Miliband disclosed that tensions between him and his brother remained over their battle for Labour leadership.
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