It is almost a certainty that the next Tasmanian premier will come from the top half of the state.
The main contenders appear to be Jeremy Rockliff, who has served as Mr Hodgman's deputy for 14 years, and Treasurer Peter Gutwein.
Mr Rockliff was the only member of government present at the announcement by media conference in the Executive Building which was also attended by Mr Hodgman's family.
Mr Gutwein did not return calls for comment last night and Mr Rockliff responded to the news by Facebook.
"Well, the events of today were a little unexpected to say the least but I want to pay tribute to a great mate, Will Hodgman, who has made a tremendous contribution to our beautiful state," he wrote.
The parliamentary Liberal Party will meet next week to decide on its future leader.
Mr Hodgman said he would not endorse any particular member.
Political analyst Professor Richard Herr told ABC Radio National there were a number of contenders who could take over the party leadership.
"Some people close to the Premier noted that he was asking his immediate core - Jeremy Rockliff, Peter Gutwein and Michael Ferguson - to make announcements that in the past premiers would have perhaps preferred to have announced to get the political credit," Professor Herr said.
"Some saw that in retrospect as something of a trial to see who would establish a claim on leadership and I don't think anyone has yet but I think it will be between Jeremy Rockliff and Peter Gutwein."
Political analyst Kevin Bonham said there had been speculation over Mr Hodgman's tenure that Mr Gutwein was heir-apparent.
"But if Rockliff is interested they may look at him [given he is] very popular, which is not to say Gutwein is not popular, but Rockliff is more so," Dr Bonham said.
"Gutwein is more of the head-kicker when it comes to opposing politicians."
Infrastructure Minister Michael Ferguson had been seen early on in the government's first term as a potential future leader.
His chances at taking leadership this time appear to have been tarnished by his time, and eventual removal, from the health portfolio.
This would make him an easy target for the opposition parties.
It is likely that former Liberal MHA Nic Street will take Mr Hodgman's seat in Franklin on the strength of his former leader's preference votes.
He was brought into Parliament in 2014 in part due to Mr Hodgman's two quotas.
The party's failure to win a third seat in the electorate four years later meant Mr Street failed to make the cut and the seat went to Labor.
After the 2018 election, he worked as a government adviser but showed his continued interest in politics when he stood for the upper house seat of Nelson in last year's Legislative Council elections.