But she will remain in Cabinet until the next Attorney-General is sworn in.
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"For me 20 years in politics is enough," Ms Jackson said. "I want to think of other things I can do with my life."
She said the decision to stand down was her own choice borne out of the desire to move on and let new blood into the Parliament.
"It hasn't been an easy decision for me to make because I have loved being in politics," she said.
"I certainly wasn't leaned on and my colleagues would say that would be impossible anyway.
"I just really didn't think I wanted to go for another election campaign."
Ms Jackson said her proudest achievements included the domestic violence legislation and the closure of mental health facility Willow Court.
She was also proud of her progressive Relationships Acts, which allows same-sex couples to be equally recognised.
Ms Jackson gave a tearful thanks to her staff and family who she said had supported her throughout the 20 years.
"I have also had the great support of my colleagues," Ms Jackson said. "No one can do anything by themselves in this job."
She also paid tribute to Premier Paul Lennon, who she described as a close ally.
"I think Paul Lennon is an excellent Premier," she said. "Paul is a really decent human being."
Ms Jackson also talked up Education Minister Paula Wriedt and Economic Development Minister Lara Giddings as the talent of the future.
"They are people who are in there to make a difference," she said. "I think the Labor Party is in very good hands."
Ms Jackson has no particular plans after she steps down from her Cabinet position at the next election.
"If I'm happy not doing anything then that's what I'd like to do," she said. "But if I feel I need to do something then I will search that out.
"I'm really happy about what I've been able to do and I'm really happy about my decision."
Mr Lennon returned the compliment and said his colleague had been one of the great reformers in the history of Tasmania.
"Judy Jackson has helped steer a more progressive social course for Tasmania and some of the reforms she has championed and implemented are world- leading," Mr Lennon said.
"Judy has a proud record of taking on difficult portfolios and delivering significant, meaningful reforms.
"In many ways she has set a daunting benchmark for those who follow her in future years in the role of Attorney-General."
The Tasmanian Gay and Lesbian Rights Group described Ms Jackson as a gay icon, a human rights icon, a great humanitarian and a great Tasmanian.
The Tasmanian Council of Social Service also praised Ms Jackson's commitment to human rights and social justice.
Ms Jackson was elected to Parliament in 1986 at the age of 38.
During her 20 years she held numerous portfolios in the Field, Bacon, and now, Lennon, governments.
She was made Attorney- General in 2002 and also holds the Planning and Environment portfolio plus Parks and Heritage.
Ms Jackson was a former secondary school teacher and has a background working in law.