"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.
"He's getting away on his own terms, I think he has been an extraordinary prime minister and I genuinely think New Zealanders will look back on him as an effective leader, a leader they are proud of."
Mr Muller told the Bay of Plenty Times he would not put his hat in the ring to take the top job, saying he was happy where he was in the Bay of Plenty and had only been in his position for two years.
"In our caucus meeting tomorrow we will reflect, and those who would consider them as a replacement will put their names forward."
New Zealand First MP Clayton Mitchell said the announcement was not something he predicted to happen this early and had sent his office into a "spin".
"I predicted that after the 2017 general election the prime minister would stand down but I certainly wasn't expecting it to happen this soon."
Mr Mitchell thought it left the National Party politically weak.
"John Key has come out supporting Bill English for the job and in 2002 National had their largest ever defeat under Bill English's leadership."
Mr Mitchell said he believed NZ First under Winston Peters was the only stable option for the country.
Western Bay of Plenty District councillor and National Party member Margaret Murray-Benge said she understood why Mr Key wanted to go out on top.
She thought there were several issues which would have haunted him in the general election - namely raising the age of national superannuation.
"He always said not on my watch would the age of national superannuation be raised from 65 but we know the country will not be able to afford it as time goes by," Ms Murray-Benge said.
Mr Key was at his best when he said the government had made a mistake about legal highs and they would be banned.
Western Bay of Plenty District councillor Margaret Murray-Benge has been a long-term supporter of National. Photo/file
Ms Murray-Benge said Stephen Joyce and Paula Bennett were her replacement picks.
"I hope Bill English continues with the finance portfolio, I don't think he is the leader. Simon Bridges is brilliant as Transport Minister, whether he is ready to take the big step is another matter."
The resignation came as a complete surprise to Rotorua MP and Trade Minister Todd McClay, whose electorate covers Te Puke.
He confirmed to the Rotorua Daily Post he would not put his name forward to lead the party.
"It was a surprise but John Key always said that he would do the job as long as he thought he had something to give."
Mr McClay said the National Party remained strong, despite today's shock news.
"[It is] the strongest I remember it since I have been involved in the National Party."
He said there were a number of people in the caucus who would be able to step forward and take on the leadership and lead the party into the next election.
When asked if he would put his hand up for the job, Mr McClay replied "no".
But he said he looked forward to helping select the new leader early next week.
In a statement, the Maori Party has said it would always be grateful to John Key for making a space at the table of his Government for a kaupapa Maori Party.
"It has been under the leadership of John Key that the Maori Party has been able to secure gains for Maori and advance kaupapa Maori over the past eight years," said Maori Party co-leader and Waiariki MP Te Ururoa Flavell.
Te Ururoa Flavell.
"We may not have agreed on everything but we've always maintained a respectful relationship with the Prime Minister and he with us," said Mr Flavell.
"We've had some tough talks on many issues but at the end of the day, respect for each other prevailed and that's why he has always seen us as a party that governments can work with," said Maori Party co-leader Marama Fox.
"We're all about whanau in the Maori Party, so we understand and support Mr Key's call to return to his family and be with them more."
Tamati Coffey, Bay of Plenty representative for the Labour Party and candidate for the Waiariki seat in next year's election, said his reaction on hearing the news was one of shock, like the rest of New Zealand.
However he said he understood the sacrifices politicians had to make.
When asked if it was a surprise, he said "yes and no".
"Third term scepticism of John Key is coming through from the voters and so it's been in the wind for a while," he said.
"This means that next year everything is up for grabs. He gave a small vote of confidence to Bill English, but Bill's not got the same appeal as John Key."
Mr Coffey said Labour and the Greens were meeting in Rotorua today to "talk about working together to change the government in 2017".
Tamati Coffey.
"There's no better time to get organising than right this moment."
