McGuinty told a surprised Liberal caucus that it's time for "renewal" and new blood.
Here's a transcript of his speech:
Sixteen years ago, when I was elected leader of our Party, the Ontario Liberals had won exactly one election in fifty years.
We couldn't do anything to help families because we couldn't win an election.
We've won three elections in a row.
But more important is what those election wins have allowed us to do.
In every area that matters most to families their schools, their health care, their environment and their economy — we've made huge progress.
We've gone from struggling schools to the best schools in the English-speaking world...
From Canada's longest health-care wait times, to the shortest
From dirty air to clean air
And the toughest drinking water standards, anywhere.
When it comes to the economy:
We've made our workforce the strongest and our taxes very competitive.
We're renewing our infrastructure. We keep creating jobs.
Ontario has recovered 13 per cent of our jobs lost in the recession.
In the U.S., it's 49 per cent.
We've positioned Ontario for decades of success.
Our government hasn't been perfect.
But when it comes to the big things that families count on us to get right schools, health care, the environment and the economy — we've gotten it right every time.
Just this afternoon, we updated Ontarians on the state of our finances.
We're once again ahead of schedule with our plan to balance the budget...
We've beaten our budget forecasts in seven of the last nine years.
I feel very good about where we are as a party and a province.
But as Liberals, we're always driving forward.
The opposition's political games are holding Ontario back.
They've told us they oppose our plan for a two-year pay freeze for government workers.
That means we can't make it law.
So, we need to go back to the drawing board.
We're going to make a sincere and determined effort to negotiate a wage freeze agreement with our labour partners.
Like the agreements already reached with 80,000 public sector workers.
We're also going to consult with the opposition about what they would support to freeze wages.
To this end, I've asked the Lieutenant Governor to prorogue the legislature to allow those discussions with our labour partners and the opposition to occur in an atmosphere that is free of the heightened rancour of politics in the legislature.
And when the legislature returns, we will either have negotiated agreements in hand or a firm sense of what the opposition will support.
As the party and government of relentless progress, we're always looking for new ideas and ways to renew ourselves.
And I've concluded that this is the right time for Ontario's next Liberal Premier and our next set of ideas to guide our province forward.
Earlier today, I asked Yasir Naqvi, our party president, to convene a leadership convention at the earliest possible time.
I will remain as Premier until that leadership convention.
And it will be my honour to continue to serve as the MPP for Ottawa South until the next general election.
I know I've asked some hard things of you.
But I've always been inspired by the ideal that the older generations work hard to build a bright future for the younger ones.
And they do this, always, with love and an unwavering commitment.
I saw that in my own mother and father.
It's what Terri and I have tried to do for our children.
And I see it in the eyes and actions of Ontario families, every day.
I thank you for the honour of serving as your Leader and your Premier...
In Ontario, the greatest province in the best country in the world.