Flaherty's office said he will still be staying on as MP.
He held the finance portfolio since 2006, the year he was elected as an MP, and was a key player in steering Canada through the 2008 financial crisis and has generally been considered to be a formidable financial steward on the world stage, winning the title of Euromoney magazine's 2009 international finance minister of the year.
Sources have confirmed to CBC News that a new finance minister will be announced Wednesday.
Flaherty's career in politics spans nearly 20 years, beginning in the hallowed halls of the Ontario legislature.
Here's a timeline with notable events from the former finance minister's long tenure in government.
June 1995: Elected as an Ontario Progressive Conservative member of provincial parliament for the Durham Centre riding. He was elected just as the NDP government under Bob Rae was winding down.
October 1997: Under the premiership PC Mike Harris, Flaherty becomes the Ontario Minister of Labour.
June 1999: He is re-elected MPP for the riding of Whitby-Ajax. He would hold a number of cabinet positions, including attorney general, deputy premier and minister of finance.
October 2001: Premier Mike Harris announces his retirement and calls for a leadership race in the spring of 2002. Flaherty launches his first bid to be leader of the Ontario PC Party.
March 2002: He loses to Ernie Eves and becomes the minister of enterprise, opportunity and innovation soon after.
October 2003: He hangs onto his seat in Whitby-Ajax as the PCs lose provincial power to Dalton McGuinty's Liberals.
November 2005: Ends his tenure as Ontario MPP.
January 2006: Elected as a federal member of Parliament for Whitby-Oshawa, under the banner of the Conservative Party of Canada.
Feb. 6, 2006: He assumes the position of federal finance minister.
November 2008: Opposition parties say they will not support the government's economic update as introduced by Flaherty because it contained no stimulus package to spur Canada's slumping economy and protect Canadian workers during the financial crisis. The opposition stated its intention to give the government a vote of non-confidence, which would trigger another federal election — just weeks after the Conservatives won with a minority government. Prime Minister Stephen Harper ends up proroguing parliament in December.
January 2009: Flaherty announces the government will be introducing stimulus measures in the 2009 budget.
"Stimulus for next year is not what we want, we need it now this year," he said. "This is urgent. This is an emergency situation of getting the stimulus into the economy to benefit Canadians, to benefit people who are going to lose their jobs and their families, and to benefit businesses."
May 2010: He reveals a federal plan to create a single, national securities regulator and argues a single regulator would be more efficient, reduce compliance costs for listing companies, and better co-ordinate regulation with the U.S. Securities and Exchange Commission. It would ultimately get rejected by the Supreme Court.
March 2011: He introduces a federal budget, but the minority Conservative government fell before it could be implemented. He delivered a second budget after the Conservatives won a majority government in May.
March 2012: He announces Canada will be scrapping the penny in the 2013 budget.
Jan. 31, 2013: Reveals he is undergoing treatment for a non-life threatening, but serious skin condition known as bullous pemphigoid. His office said some side-effects of his treatment are bloating, weight gain, redness in the face and bouts of sleeplessness.
September 2013: The federal government unveils another plan to create a single national securities regulator. Ontario and British Columbia sign on, which marks a significant advance in Flaherty's efforts.
Nov. 12, 2013: He delivers the fall economic and fiscal update in Edmonton. He projected a deficit of $5.5 billion for 2014-15, and a projected surplus of $3.7 billion in 2015-16. When asked if he would run in the next federal election, he responded: "Yes. Nothing has changed. I have work to do. I gotta balance the budget, I said I would."
December 2013:Flaherty and Employment and Social Development Minister Jason Kenney engage in heated argument in the House of Commons. Flaherty tells Kenney to "shut the f--- up" after Kenney says Toronto Mayor Rob Ford should step down to deal with his substance-abuse problems. Flaherty, the minister responsible for the Greater Toronto Area, is a close family friend of the Fords.
Feb. 11: The 2014 federal budget is tabled with a $2.9-billion deficit, just within the $3-billion contingency Flaherty has built in in case of major blows to Canada’s economy. For all intents and purposes, the budget is balanced. The Finance Department upgrades its projected surplus for next year to $6.4 billion from $3.7 billion.
Feb. 12: He causes a bit of a ruckus when he suggests he would no longer support the Conservative campaign promise of income-splitting, saying that he's "not sure that overall it benefits our society."
March 18: He resigns from federal cabinet for an eventual return to the private sector. His staff says he is staying on as MP.