Rob Lantz said Monday at a Charlottetown news conference his decision was based on winning the full support of the caucus and the party executive to continue in his role.
Party rules require a leadership review be held at a date not sooner than one year after the May 4 election and no later than 26 months after the vote.
"I think we can generally say the 12-month mark will be a significant checkpoint in this arrangement," Lantz said in a telephone interview.
The Liberals won their third straight majority under rookie premier Wade MacLauchlan, dropping from 20 seats to 18, while the Tories rose from three to eight seats, and the Green party claimed its first seat in the legislature.
Lantz said he was disappointed he didn't win the riding of Charlottetown-Brighton, but added that with more time to plan and fundraise he and his party would have fared better.
"We had very little time to rebuild our party into a position of strength. There has been difficult, dark times in recent years and we haven't been able to fully recover from that," he said.
Lantz was voted in as leader in late February after the party went through several years of infighting and leadership battles.
He said he will be the spokesman for the party and will focus on rebuilding the party at the constituency level, while Steven Myers will continue as Opposition leader and James Aylward will remain as house leader.
Lantz said he will not be asking any of the caucus to give up their seat to allow him to run.
He also says he will run in a byelection if a vacancy occurs and it is not too far fom his home in Charlottetown.
The party leader said he expects to draw a salary but the amount has yet to be set by the Tory executive.
"I'm in a position where I'll have to take what I'm given ... There's even a possibility I'll have to go back to work in some capacity," said Lantz.
He is currently on leave from his job as a business analyst for a technology firm.
— By Michael Tutton in Halifax.
Follow @mtuttoncporg on Twitter