Duncan announced his decision at a Wednesday morning news conference.
"As the Liberal party moves forward with renewal, I've decided that it's time for me to move forward. Therefore I will not be seeking the leadership of the Liberal party. I will also not be running in the next general election," he said.
Duncan also expressed interest at working with the federal Liberals as they rebuild and work to choose a new leader.
"I will stay very involved," he said.
Duncan also said he has no specific job waiting for him and said he will support his friend and former Windsor West MPP Sandra Pupatello if she chooses to seek the leadership.
Pupatello, a 16-year member of the legislature who retired in 2011 before taking a job with PricewaterhouseCoopers earlier this year.
The Liberals will hold a leadership convention in January to replace Dalton McGuinty, who made a surprise announcement last week that he was stepping down after 16 years as Liberal leader and nine years as premier.
Pupatello remains undecided
Pupatello, who appeared on CBC's Metro Morning on Wednesday, said she will make a decision in the next few days about whether to seek the party leadership.
"I haven't decided yet," she said when host Matt Galloway opened the interview by asking if she would run.
Pupatello said she and her husband would discuss the time commitment running for leadership would require.
"With this kind of business, you don't just change your job, you change your life because that is what you sign on to when you get back into public life," she said.
"Clearly I'm leaning that way, and I'm feeling good about that, but there are still variables for me," said Pupatello on CBC's The Early Shift on Wednesday.
Pupatello said she expects a strong field of candidates.
"I've got to stack myself up against them and say, 'How am I so much better than them that I will once again have this big life change for me?'"
Economy 'only thing that matters today'
Pupatello said if she does run, boosting Ontario's economy will form a key component of her campaign.
"To my way of thinking, it's the only thing that matters today. Things are tough out there and they're not expected to get easier.
"We look at our neighbouring provinces and see a swelling of government revenue, and here we are chugging along at two per cent growth. That concerns me."
Galloway asked Pupatello where she stood on McGuinty's decision to prorogue parliament, a move opposition parties have claimed is undemocratic and aimed at putting a lid on a number of simmering scandals facing the Liberals.
"I can see why this is the choice they made," she said. "I wasn't there, I don't know all the details that led to the decision but I can understand that an economy as big as Ontario, you cannot throw a government into chaos. You can't unstable this government."
The CBC's Robert Fisher said that if Pupatello pursues the Liberal leadership, she could face questions about her decision to not run for re-election in 2011.
"I suspect…that when this campaign gets going officially, you’re going to hear a lot from other candidates about: 'Where was Sandra Pupatello when we needed her the most?'" he said Wednesday.