Dix, who was variously jovial and emotional during his announcement Wednesday, said although party members worked seamlessly in the lead up to May's vote, the failure to win was his.
"That we fell short on election day is my responsibility as leader," he said.
"It's become clear to me that the best interests of our party mean that I need to step aside for a new leader who will win the next election in 2017."
Dix said he hopes a leadership vote will be held no later than the middle of next year and that he'll retain his Vancouver-Kingsway seat and run again while doing everything he can to support the new leader.
Port Coquitlam New Democrat Mike Farnworth said Dix's leadership decision will go a long way towards relieving uncertainties some party members were feeling about the future direction of the party.
He said he now expects the NDP to host a constructive and robust convention in November where party renewal and leadership will be openly debated.
Farnworth, the NDP's finance critic and considered a likely leadership candidate, said he will consult widely about his leadership ambitions, but it appeared Wednesday he is considering making his second run for party leader.
"I'm going to be talking to my colleagues, with members of the party because to me what's important is the next leader, whoever that person is, has the ability to win the next election in 2017," he said. "Clearly, I will be giving it very serious consideration."
Speculation about what Dix would do had been swirling for months and he left the legislature in July saying he would take time to reflect on his political future.
Christy Clark's Liberals staged an epic come-from-behind win on May 14 when they erased a 20-point NDP lead in the polls and gave the Liberals a fourth consecutive mandate.
Since the election, Dix was rarely in the public eye and his supporters were quiet.
However, detractors had been publicly calling for him to indicate his exit so the party could get on with the rebuilding process.
Afterwards, when the shock of the outcome had worn off, New Democrats began to publicly question the party's strategy during the campaign.
In particular, Dix's decision mid-campaign to oppose the proposed expansion of the Kinder Morgan pipeline — a move Dix admittedly said was made with little consultation within the party — was heavily criticized as a job-killer by some in the labour wing of the party.
As well, Dix was strafed privately by party insiders frustrated with his staunch refusal until very late in the campaign to respond in kind to the Liberals' relentless attack ads. Dix, supported by former members of federal NDP Leader Jack Layton's campaign team, had been steadfast in his effort to run what he called a "positive" campaign.
None of that matters now, Dix said.
"I think as a party we need to move forward. We have to learn the lessons of that but not fixate on them because we've got work to do holding the Liberal party to account, first of all, and getting our own house in order and preparing for a coming election campaign," he said.
"I strongly believe it's a role of leadership and to ensure unity and to bring people together. That's what guided me. ... I believe, that the best outcome for the NDP will result in having a new leader."
Dix was widely credited for pulling the party together after a divisive public fight over Carole James' leadership. After a group of New Democrat MLAs, including long-time party stalwart Jenny Kwan, launched a public campaign to dump James, she stepped aside.
James has said it was Dix who convinced her to remain in her seat and run again.
Kwan said Wednesday Dix made the right move by announcing his decision to step down as leader.
"He demonstrated real leadership in that he has put the party ahead of anything," she said.
Kwan said she does not see herself running for the top job.
When Dix was asked if the party is now at risk of coming apart again, he said firmly the NDP's new caucus is united and strong.
"Our new members are just outstanding. I just came from a meeting of our caucus and I think we are resolute and determined to keep the government to account for their cynical campaign."
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