He made the announcement at Maureen MacDonald's constituency office on Saturday morning. His resignation is effective Nov. 23.
In the last provincial election Dexter lost his Cole Harbour-Portland Valley seat by 21 votes as the New Democrats were relegated to third-party status with seven elected member.
Voters in Nova Scotia dumped the NDP after giving Dexter an historic election victory four years ago.
Dexter became premier after the June 2009 election, but his popularity with the public was quickly tested when he went back on a promise not to raise the harmonized sales tax, a measure he said had to be taken to turn around the province's poor fiscal state.
On Oct. 8, Nova Scotians voted the Liberal party into power, marking the first time in 131 years that Nova Scotians haven't given an incumbent party a second chance at running the province.
Dexter is a former journalist and lawyer. He was first elected in 1998.
MacDonald had taken on the role of NDP leader in the house, following the election.