National MP for the Bay of Plenty Todd Muller said the news was a complete "surprise and shock".
Mr Muller and other party members were pulled into a caucus meeting to be informed just before Mr Key made the public announcement.
"He took us through his rationale as to why he made the decision. He shared with us that he had been the leader of the National Party for 10 years and committed a huge amount of his time and energy to it.
"He just felt from a family perspective it was time for him to step away," Mr Muller said.
Mr Muller said Mr Key also spoke about a "renewal" in the party, saying political leaders often overstayed their welcome.