Labour MP David Cunliffe is retiring from politics.

Cunliffe told caucus of his decision today.

Labour leader Andrew Little said Cunliffe intended to step down next year, likely within six months of the next election to avoid triggering a byelection in his New Lynn electorate.

Cunliffe was taking up a role at the Auckland-based management consultancy Stakeholder Strategies Ltd.

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"He has made a strong contribution to the party as the MP for New Lynn since 1999 and as a former leader and finance spokesperson," Little said.

"He was a Cabinet Minister in the Fifth Labour Government where he held the portfolios of Health, and Information and Communications Technology, and Immigration."

Cunliffe has been an MP since 1999 in the Titirangi and New Lynn seats.

He led the party from August 2013 until the general election in 2014, when Labour suffered its worst election result since 1922.

Labour polled just 25.13 per cent, forcing him to resign as leader after the election.

He initially promised to re-contest the leadership but stood aside after widespread criticism.

Little demoted him to the back bench after becoming leader and made it clear he did not expect Cunliffe to be in any Cabinet he led.

His departure opens a chance for another MP in the historically safe Labour seat of New Lynn, although in 2014 Cunliffe's majority had dropped to 4,557 and National was beating Labour in the party vote.

Cunliffe was a successful minister in Helen Clark's Government, in which he held the health and IT portfolios. As IT Minister, he earned praise for unbundling Telecom's local loop monopoly. After Labour was defeated in 2008, he rose to number 3 on the party list and was appointed finance spokesman.

When Phil Goff stood down as leader after defeat in the 2011 general election, Mr Cunliffe ran for the leadership but lost to David Shearer.

He was demoted to the backbenches in February after he refused to rule out a challenge for Mr Shearer's position at Labour's annual conference in November.

After Mr Shearer resigned on August 22, Mr Cunliffe made his second bid for the leadership.