He leaves behind a six-year tenure in public life that saw him preside over several of the majority Progressive Conservative government's top cabinet posts.
Kennedy said he decided over the summer to leave politics and expects to join a law firm or start building his own by Nov. 1.
"It's with a combination of sadness and disappointment and also an excitement to be going on to my next phase of my career in life," Kennedy told a news conference alongside Premier Kathy Dunderdale.
"Politics has been really a new thing for me. It's been up and down, but one thing I've learned is a day is a long time, a year is a lifetime in politics."
Kennedy brushed aside questions over whether recent poll results or any disputes with Dunderdale factored into his decision.
"In cabinet, when you work with people as closely as we've worked together over the last number of years, there's always disagreements," said Kennedy, 53.
"It's like a family."
Dunderdale also said any speculation of a major rift between the two is overblown.
"We argue all the time. We are passionate about what we do," she said.
"He has brought so much value to the work we do. He has served the people of his district and the people of this province extremely well. I feel the same bittersweetness that he's feeling today."
Prior to his life in politics, Kennedy was a well-known criminal lawyer who served as counsel for several men wrongly accused of murder, including James Driskell, Ronald Dalton and Greg Parsons.
During the October 2007 provincial vote, he was elected to represent the riding of Carbonear-Harbour Grace west of St. John's. Since then, in addition to serving as minister of finance, he has been at various times the minister of health, justice and natural resources.
In those roles he oversaw a number of the government's most contentious issues. They included the $7.7-billion Muskrat Falls hydroelectric project now under construction in Labrador, and contract talks with the province's civil servants.
Dwight Ball, a leadership candidate for the Opposition Liberals, said Kennedy's departure is a blow for the government as it downplays successive polls suggesting a plunge in approval ratings since Dunderdale took over from former premier Danny Williams.
"It's like any team," Ball said. "If you take a star player and you remove that star player, you have big shoes to fill."
Ball predicts that Kennedy won't be the last to leave Dunderdale's caucus.
"I really do believe that within the next couple of months, really, that we'll be hearing more and more of this."
Dunderdale said Wednesday that the Progressive Conservative government's popularity also took a hit in 2003 when it had to cut spending. Still, she said she won't shy away from tough decisions such as the move last spring to slash about 1,200 public sector jobs after the province projected a $564-million deficit this year.
Dunderdale is expected to shuffle her cabinet before Oct. 15.